Weekend Economists Contemplate Life, Death and Immortality May 14-16, 2010

[Demeter]

Well, it's been another in a series of cliff-hanging, hair-raising, death-defying weeks, and what have we got to show for it?

A monstrous pool of killer oil where once fish lived and people swam.

An SEC with a new lease on life.

The Euro and the Common Market, hanging by a thread.

And that's just the ones I can readily call to mind.

So, Life, Death, Rebirth, the Circle of Life, as the Man with the Mouse put it.

And Immortality--the reason why Man does anything besides eat and sleep.

How is that, you ask? Well, I'll develop this theme as it comes to me, but basically: consider the Corporation. Like Family, Tribe, Nation, and Religion before it, the Corporation was designed to outlast any particular man's life: to achieve a form of Immortality--the dead hand acting beyond the grave, the diabolical scheme surviving the villain, etc. We are living in times where this struggle: Life, Death and Immortality, is being played out large and in 3 D. May you live in interesting times! Funny how that particular curse is attributed to the Chinese....

[Demeter]

1. I'm Going to Quote G&S Here--Hugin Can Skip This Post

MABEL. Oh, Frederic, cannot you, in the calm excellence of your wisdom,
reconcile it with your conscience to say something that will relieve my father’s sorrow?

FRED. I will try, dear Mabel. But why does he sit, night after night, in this
draughty old ruin? (A mortuary on the Colnel's estate).

GEN. Why do I sit here? To escape from the pirates’ clutches, I described myself as an orphan; and, heaven help me, I am no orphan! I come here to humble myself before the tombs of my ancestors, and to implore their pardon for having brought dishonour on the family escutcheon.

FRED. But you forget, sir, you only bought the property a year ago, and the stucco on your baronial castle is scarcely dry.

GEN. Frederic, in this chapel are ancestors: you cannot deny that. With the estate, I bought the chapel and its contents. I don’t know whose ancestors they were, but I know whose ancestors they are, and I shudder to think that their descendant by purchase (if I may so describe myself) should have brought disgrace upon what, I have no doubt, was an unstained escutcheon.

FRED. Be comforted. Had you not acted as you did, these reckless men would
assuredly have called in the nearest clergyman, and have married your large family on the spot.

GEN. I thank you for your proffered solace, but it is unavailing. I assure you,
Frederic, that such is the anguish and remorse I feel at the abominable falsehood by which I escaped these easily deluded pirates, that I would go to their simple-minded chief this very night and confess all, did I not fear that the consequences would be most disastrous to myself. At what time does your expedition march against these scoundrels?

FRED. At eleven, and before midnight I hope to have atoned for my involuntary
association with the pestilent scourges by sweeping them from the face of the earth –and then, dear Mabel, you will be mine!

GEN. Are your devoted followers at hand?

FRED. They are, they only wait my orders.

RECIT – GENERAL.
Then, Frederic, let your escort lion-hearted
Be summoned to receive a General’s blessing,
Ere they depart upon their dread adventure.

FRED. Dear, sir, they come.

Enter Police, marching in single file. They form in line, facing audience.

SONG – SERGEANT, with POLICE.

When the foeman bares his steel,
Tarantara! tarantara!
We uncomfortable feel,
Tarantara!
And we find the wisest thing,
Tarantara! tarantara!
Is to slap our chests and sing,
Tarantara!

For when threatened with emeutes,
Tarantara! tarantara!
And your heart is in your boots,
Tarantara!
There is nothing brings it round
Like the trumpet’s martial sound,
Like the trumpet’s martial sound

ALL. Tarantara! tarantara!, etc.

MABEL. Go, ye heroes, go to glory,
Though you die in combat gory,
Ye shall live in song and story.
Go to immortality!

Go to death, and go to slaughter;
Die, and every Cornish daughter
With her tears your grave shall water.
Go, ye heroes, go and die!

GIRLS. Go, ye heroes, go and die!

SERGEANT, with POLICE.

Though to us it’s evident,
Tarantara! tarantara!
These attentions are well meant,
Tarantara!
Such expressions don’t appear,
Tarantara! tarantara!
Calculated men to cheer,
Tarantara!
Who are going to meet their fate
In a highly nervous state.
Tarantara! tarantara! tarantara!
Still to us it’s evident
These attentions are well meant.
Tarantara! tarantara! tarantara!

EDITH. Go and do your best endeavour,
And before all links we sever,
We will say farewell for ever.
Go to glory and the grave!

GIRLS. Go to glory and the grave!
For your foes are fierce and ruthless,
False, unmerciful, and truthless;
Young and tender, old and toothless,
All in vain their mercy crave.

SERG. We observe too great a stress,
On the risks that on us press,
And of reference a lack
To our chance of coming back.
Still, perhaps it would be wise
Not to carp or criticise,
For it’s very evident
These attentions are well meant.

POLICE. Yes, it’s very evident
These attentions are well meant, etc.

ENSEMBLE.
CHORUS OF ALL BUT POLICE. CHORUS OF POLICE.
Go ye heroes, go to glory, etc When the foeman bears his steel, etc.

GEN. Away, away!
POLICE. (without moving) Yes, yes, we go.
GEN. These pirates slay.
POLICE. Tarantara!
GEN. Then do not stay.
POLICE. Tarantara!
GEN. Then why this delay?
POLICE. All right, we go.
Yes, forward on the foe!
GEN. Yes, but you don’t go!
POLICE. We go, we go
Yes, forward on the foe!
GEN. Yes, but you don’t go!
ALL. At last they really go!
Exeunt Police.

http://www.youtube.com/watch?v=yZVQ2RJ9tLk&feature=related

[Lucky Luciano]

92. I thought you meant Gluskin & Scheff - a Canadian Wealth Management firm - they have a good

economist everyone should read. His notes are fantastic! They are free too! I get them daily in my email. His name is David Rosenberg and used to be the choef economist at Merrill Lynch - he quit when BoA bought Merrill and they became a TARP bank thereby limiting his compensation. He, of course, favors Wall St since he works there (or the Toronto version of it now), but he is far more of a realist than most. He really drills down why the numbers that look rosy on the outside may not be so rosy. He will also point out thos eeconomic stats that are good (not many). He takes note of the horrible wage deflation for workers and really "gets it." His dissection of the economic numbers is right to the point and really brings you clarity - it explains so well why things are not what those numbers would suggest (I cannot emphasize this enough).

I recommend everyone sign up for his newsletter - just do a search for him. I may repeat this post again, because he is so good. I make a lot of my trading decisions based on the info he provides. Just remember, his commentary is good for broad general strategies and may not be optimal for "trading." I was long the market until a few weeks ago and cut half my positions shortly after I posted here about a Newsweek magazine cover bragging about how "America is Back!" (talk about the cue that we are at the top of the market!). I cut the other half Thursday after reading Rosenberg's comments that 400 point up days on the Dow are big time bear market signals - he is 1000% right - that and all the other stuff converging on us made me go into US Treasuries and cash for 90% of my 401K - the other 10% is still in stocks.

[Demeter]

96. Thanks Luciano, I'll look into him

Appreciate any sources recommended.

[truedelphi]

2. Please note your mis spelling of the word

Most used in the topic.

It is CorpoRATion. Many reasons for spelling it this new way, and few for spelling it the old way.

Other than that, K & R.

[Demeter]

4. So Noted, and Thanks!

[jotsy]

23. !

Appropriately stated.

Hope all is well w/ you.:hi:

[Demeter]

3. And a Quartet of Banks Bids Us Farewell Tonight

Satilla Community Bank, Saint Marys, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Ameris Bank, Moultrie, Georgia, to assume all of the deposits of Satilla Community Bank.

The sole branch of Satilla Community Bank will reopen on Monday as a branch of Ameris Bank...As of March 31, 2010, Satilla Community Bank had approximately $135.7 million in total assets and $134.0 million in total deposits. Ameris Bank will pay the FDIC a premium of 0.19 percent to assume all of the deposits of Satilla Community Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets.

The FDIC and Ameris Bank entered into a loss-share transaction on $101.0 million of Satilla Community Bank's assets. Ameris Bank will share in the losses on the asset pools covered under the loss-share agreement...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.3 million. Ameris Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. Satilla Community Bank is the 69th FDIC-insured institution to fail in the nation this year, and the eighth in Georgia. The last FDIC-insured institution closed in the state was Unity National Bank, Cartersville, on March 26, 2010.


New Liberty Bank, Plymouth, Michigan, was closed today by the Michigan Office of Financial and Insurance Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Ann Arbor, Ann Arbor, Michigan, to assume all of the deposits of New Liberty Bank.

The sole branch of New Liberty Bank will reopen on Saturday as a branch of Bank of Ann Arbor...As of March 31, 2010, New Liberty Bank had approximately $109.1 million in total assets and $101.8 million in total deposits. Bank of Ann Arbor did not pay the FDIC a premium for the deposits of New Liberty Bank. In addition to assuming all of the deposits of the failed bank, Bank of Ann Arbor agreed to purchase essentially all of the assets.

The FDIC and Bank of Ann Arbor entered into a loss-share transaction on $95.2 million of New Liberty Bank's assets. Bank of Ann Arbor will share in the losses on the asset pools covered under the loss-share agreement...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.0 million. Bank of Ann Arbor's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. New Liberty Bank is the 70th FDIC-insured institution to fail in the nation this year, and the third in Michigan. The last FDIC-insured institution closed in the state was CF Bancorp, Port Huron, on April 30, 2010.


Southwest Community Bank, Springfield, Missouri, was closed today by the Missouri Division of Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Simmons First National Bank, Pine Bluff, Arkansas, to assume all of the deposits of Southwest Community Bank.

The sole branch of Southwest Community Bank will reopen on Saturday as a branch of Simmons First National Bank...As of March 31, 2010, Southwest Community Bank had approximately $96.6 million in total assets and $102.5 million in total deposits. Simmons First National Bank will pay the FDIC a premium of 0.50 percent to assume all of the deposits of Southwest Community Bank. In addition to assuming all of the deposits of the failed bank, Simmons First National Bank agreed to purchase essentially all of the assets.

The FDIC and Simmons First National Bank entered into a loss-share transaction on $66.8 million of Southwest Community Bank's assets. Simmons First National Bank will share in the losses on the asset pools covered under the loss-share agreement...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $29.0 million. Simmons First National Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. Southwest Community Bank is the 71st FDIC-insured institution to fail in the nation this year, and the fourth in Missouri. The last FDIC-insured institution closed in the state was Champion Bank, Creve Coeur, on April 30, 2010.


Midwest Bank and Trust Company, Elmwood Park, Illinois, was closed today by the Illinois Department of Financial Professional Regulation – Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Firstmerit Bank, National Association, Akron, Ohio, to assume all of the deposits of Midwest Bank and Trust Company.

The 23 branches of Midwest Bank and Trust Company will reopen on Saturday as branches of Firstmerit Bank, National Association...As of March 31, 2010, Midwest Bank and Trust Company had approximately $3.17 billion in total assets and $2.42 billion in total deposits. Firstmerit Bank, National Association will pay the FDIC a premium of 0.4 percent to assume all of the deposits of Midwest Bank and Trust Company. In addition to assuming all of the deposits of the failed bank, Firstmerit Bank, National Association agreed to purchase essentially all of the assets.

The FDIC and Firstmerit Bank, National Association entered into a loss-share transaction on $2.27 billion of Midwest Bank and Trust Company's assets. Firstmerit Bank, National Association will share in the losses on the asset pools covered under the loss-share agreement...

As part of this transaction, the FDIC will acquire a value appreciation instrument. This instrument serves as additional consideration for the transaction.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $216.4 million. Firstmerit Bank, National Association's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. Midwest Bank and Trust Company is the 72nd FDIC-insured institution to fail in the nation this year, and the eleventh in Illinois. The last FDIC-insured institution closed in the state was New Century Bank, Chicago, on April 23, 2010.

[hamerfan]

14. There are still banks in Georgia?

Learn something new every day!

[Demeter]

17. Well, there WAS at Least One, Until Tonight

[ozymandius]

19. O'Dell's Moveable Bank and Trust is still in operation.

Whenever the FDIC guys show up - they crank 'er up and put the pedal to the metal.

[Robbien]

85. I looked it up, there are four times as many banks in Georgia than there is in Calif.

Georgia differs from much of the nation in that up until 1996 it restricted banks to operating only in the counties where they were chartered. Georgia has 159 counties, and there are 28 in metro Atlanta alone. That's why Georgia has about four times as many banks as California does, even though California has four times Georgia's population.

http://www.istockanalyst.com/article/viewiStockNews/articleid/4122360


The little banks didn't get bailed out for their greed as the big banks did, so it makes sense all these little ones in Georgia are going down.

[Demeter]

95. Very Interesting! Thanks, Robbien!

It's an education, for sure!

[Demeter]

25. That's a Mere $301.7 Million Down the Tubes This Weekend

The FDIC must be saving up for a big one.

[truedelphi]

40. The way I understand it is this -

To keep the FDIC insurance, all banks have to make advance payments and pay ahead. Far ahead.

So the smaller banks pay for the FDIC insurance but that leaves them with less reserves. Then if they were to get money from outside their own resources, as a loan, they will be paying more in terms of an interest rate, since their resources are less.

Then it becomes a terrible, ever spiralling journey downward.

But in the end, if they get bought out by a bigger bank, that bank not only acquires them pennies on the dollar, but receives as a credit the money that the smaller bank had paid in advance to the FDIC.

Oh, and not surprisingly it was the bigger banks that insisted on these new rules.

[Demeter]

46. Buffalo Bills- The Music Man "Pick-a-little/Goodnight Ladies

http://www.youtube.com/watch?v=jbhnRuJBHLs

[Demeter]

5. Comic Relief

Mark Fiore Chimes In on the "Wisdom of the Markets"

http://www.markfiore.com/political-cartoons/watch-stock-market-rally-crash-european-bailout-greece-animated-video-mark-fiore-animation-political-cartoons

[Demeter]

35. When the Market Gives You the Fat Finger By Rocky Vega

http://dailyreckoning.com/when-the-market-gives-you-the-fat-finger/

Jon Stewart of The Daily Show believes in the market… he just doesn’t believe in perfect storms anymore. Pundits proclaim that every event we’ve recently watch wreak havoc in the market has only a million in one chance of taking place… why then are the crises happening weekly?

Watch the clip below to see Stewart’s assessment, which came to our attention via The Reformed Broker. AT LINK

[Demeter]

6. Keen, Roubini and Baker win Revere Award for Economics

Steve Keen (University of Western Sydney), receiving more than twice as many votes as his nearest rival, has been judged the economist who first and most cogently warned the world of the coming Global Financial Crisis. He and 2nd and 3rd place finishers Nouriel Roubini ( New York University ) and Dean Baker (Center for Economic and Policy Research) have won the Revere Award for Economics . The award, sponsored by the Real World Economics Review Blog is named in honour of Paul Revere and his famous ride through the night to warn Americans of the approaching British army.

In announcing the winners, Edward Fullbrook, editor of the Real World Economics Review, said:

Keen , Roubini and Baker have been judged in a poll by their peers, over 2,500 of them, to be the three economists who first and most cogently warned of the approaching Global Financial Collapse. If the powers of the world had listened to these guys or any of the other finalists, instead of Greenspan, Summers and that lot, the collapse and all the human misery and lost opportunity it caused and is still causing would have been avoided.

More than 2,500 people voted — most of whom were economists themselves from the 11,000 subscribers to the real-world economics review . With a maximum of three votes per voter, a total of 5,062 votes were cast. The voters were asked to vote for

the three economists who first and most clearly anticipated and gave public warning of the Global Financial Collapse and whose work is most likely to prevent another GFC in the future.

The poll was conducted by PollDaddy. Cookies were used to prevent repeat voting.

Commenting on the results, Fullbrook said:

The general failure to warn of the approaching Global Financial Collapse showed that in the economics profession today the general level of competence at real-world economics is grievously less than what society requires. Worse, some people in the economics establishment have attempted to evade all responsibility for the Collapse by calling it an unpredictable, “Black Swan” event. Such statements are plainly untruthful. Some economists did, and on the basis of deep analysis, foresee the crisis and warn the public of its approach. At the time they were widely ridiculed for doing so. Hopefully the Revere Award will give these economists some of the professional and public recognition they deserve, and encourage others to utilize their methods, and increase the likelihood that, for the benefit of humankind, empirically responsible economists, instead of faith-based ones, will be listened to in the future. I must emphasize that it is not just for the winners’ sake but for everyone’s that Keen, Roubini and Baker should be given public credit for their competence and courage.

Revere Award Citations

Steve Keen (1,152 votes)


Keen’s 1995 paper “Finance and economic breakdown” concluded as follows:

The chaotic dynamics explored in this paper should warn us against accepting a period of relative tranquillity in a capitalist economy as anything other than a lull before the storm .

In December 2005, drawing heavily on his 1995 theoretical paper and convinced that a financial crisis was fast approaching, Keen went high-profile public with his analysis and predictions. He registered the webpage www.debtdeflation.com dedicated to analyzing the “global debt bubble”, which soon attracted a large international audience. At the same time he began appearing on Australian radio and television with his message of approaching financial collapse and how to avoid it. In November 2006 he began publishing his monthly DebtWatch Reports (33 in total). These were substantial papers (upwards of 20 pages on average) that applied his previously developed analytical framework to large amounts of empirical data. Initially these papers analyzed the Global Financial Collapse that he was predicting and then its realization.

Nouriel Roubini (566 votes)


In summer 2005 Roubini predicted that real home prices in the United States were likely to fall at least 30% over the next 3 years. In 2006 he wrote on August 23:

By itself this slump is enough to trigger a US recession.


And on August 30 he wrote:

The recent increased financial problems of … sub-prime lending institutions may thus be the proverbial canary in the mine – or tip of the iceberg – and signal the more severe financial distress that many housing lenders will face when the current housing slump turns into a broader and uglier housing bust that will be associated with a broader economic recession. You can then have millions of households with falling wealth, reduced real incomes and lost jobs…

In November 2006 on his blog he wrote:

he housing recession is now becoming a construction recession; and the construction recession is now turning into a clear auto and manufacturing recession; and the manufacturing recession will soon turn into a retail recession as squeezed households – facing falling home prices and rising mortgage servicing costs – sharply contract their rate of consumption.

Dean Baker (495 votes)


In August 2002 Baker published “The Run-Up in Home Prices: Is It Real or Is It Another Bubble?” in which he concluded that it was the latter. In December 2003 he published in the Los Angles Times “Who to Blame When the Next Bubble Bursts”. This was the first of dozens of columns appearing in US newspapers that Baker wrote on the bubble. In one from May 2004, “Building on the Bubble”, he wrote:

The fact that people are borrowing against their homes at a rapid rate (more than $750 billion in 2003) is more evidence of an unsustainable bubble. The ratio of mortgage debt to home equity is at record highs.

In 2006 he put out repeated warnings of the systemic implications of the housing bubble, and in November published the paper “Recession Looms for the U.S. Economy in 2007” in which he wrote:

The wealth effect created by the housing bubble fuelled an extraordinary surge in consumption over the last five years, as savings actually turned negative. …This home equity fuelled consumption will be sharply curtailed in the near future…. The result will be a downturn in consumption spending, which together with plunging housing investment, will likely push the economy into recession.

The vote totals for the other finalists were:

Joseph Stiglitz 480

Ann Pettifor 435

Robert Shiller 409

Paul Krugman 399

Michael Hudson 351

Wynne Godley 281

George Soros 262

Kurt Richebächer 168

Jakob Brøchner Madsen 64


More information about the contributions of the winners and finalists is available at Foresight and Fait Accompli: Two Timelines for the Global Financial Collapse

[Demeter]

7. The Dangerous Mixture of Money and Family by Bill Bonner

We're attending a conference with our family office partners. It's a very interesting project, trying to figure out how to put together a family fortune...and hold onto it.

"There are two parts to the challenge," we told our audience this morning. "First you need money. Second, you need a family."

We thought that was enough for one day, but the partners wanted more. So, we elaborated.

"Getting the money is the easier part. The hard part is putting together a family that knows what to do with it...and how to keep it.

"I will give you a warning right in the very beginning; money and family can be a dangerous mixture. Money can have a corrosive or even toxic effect on a family. It's hard enough to create a successful, happy family. Add money without properly preparing the family for it and you may cause a disaster. It is quite possible that you will destroy both the money and the family.

"Children, even those who got along well before they got an inheritance, may soon be at each others' throats..."

[Demeter]

8. The Midterm Is the Message Tim Fernholz

http://prospect.org/cs/articles?article=the_midterm_is_the_message

Democrats are split about how to talk about the economy come this November.

The signs of an intraparty rift are easy to spot, and tensions are rising between a Democratic White House concerned with its own image and congressional allies facing their toughest election in years. A muted public (and political) reaction to the Democratic National Committee's big 2010 campaign roll-out was followed by public complaints from Democratic Congressional Campaign Committee Chair Chris Van Hollen.

Now, the establishment is taking notice: Flagship center-left think tank the Center for American Progress hosted an event Tuesday that echoed the concerns of the congressional wing of the party and its critiques of the president and his DNC chair, Tim Kaine.

The message from Congress and these outside advisers? With midterm elections approaching, it's high time for the White House to start drawing a contrast between the two parties in Congress. The current emphasis on results and fixing Washington isn't jibing with a public that still feels the hurt of recession, is tired of incumbents, and doesn't seem convinced by counterfactual arguments that portray a potentially worse economy. Nearly half of Americans say improving the economy and growing jobs should be the top national priority, so how Democrats lay out their plans on this issue could be the difference between the majority and the minority.

In the presentation at the CAP event, longtime Democratic message maven Stan Greenberg, with CAP president and fellow Clinton alum John Podesta at his side, presented opinion research on how voters -- especially Republican-leaning, white, working-class voters and the Obama coalition of young people, women, and minorities -- react to different messages on economic issues. It became clear in his presentation that Greenberg favors a very different approach from the White House.

Obama and Kaine have discussed the economy in terms of successful policies that are just beginning to work, selling the Democrats as "the party of results." Greenberg polls say that message doesn't give Democrats a huge advantage over their Republican competition.

"Nobody responded to the jobs report the right way," Greenberg told me after the presentation, referring to Friday's announcement of the largest jobs growth in four years. He worries that voters, busy dealing with personal economic problems, won't respond kindly when Democrats tout the policies enacted to ease the burden of the recession.

He urges Democrats to focus more on the future and less on the past. "It doesn't surprise me that people who battled to get an economic plan want to get the credit for it, but it's not about what you're going to do in the future," he says. The strongest message, he says, is emphasizing the benefits to the middle class and drawing a strong contrast with Republicans and corporate interests; Clinton's empathy infused with a post-financial crisis populism. Asked if time remains for Democrats to shift their message, Greenberg says, "This is the moment to do it, when people are paying attention."

Complaints about the White House strategy began last month after President Obama's financial-reform speech at Cooper Union, where he talked about the challenges of overhauling Wall Street in the face of lobbyist opposition -- but didn't mention Republican efforts to slow the financial-reform bill.

Soon after, Democrat congressional leaders asked for a meeting with senior White House staff, including top Obama adviser David Axelrod. Axelrod asked the leaders to campaign on their results and tough votes, saying that what Democrats fought for showed courage. In turn, the congressional leaders asked the White House to speak more clearly about Republican obstruction.

"The message I would convey to the White House folks is that we are proud of these accomplishments, you can't talk about Washington being broken without explaining who broke it and who is in the way of fixing it," a Democratic official who works on election strategy told me. "It boomerangs back on us."

The dilemma is clear. Obama remains much more popular than his congressional allies, yet his approval ratings still hover at about 50 percent. With polling suggesting that Republicans could take control of the House next year, and the 2012 presidential race looming, the Obama's advisers clearly want him to stay above the fray and separate from the ordinary politics of Washington -- especially with GOP votes needed for financial reform and to confirm his Supreme Court nominee, Elena Kagan.

"The president ran as an outsider. A lot of his messages were similar to what we used in 2006 and 2008," the Democratic official says. With Democrats now responsible for government, though, congressional Democrats say the strategy needs to shift into not just what they've done but also the obstacles that stand in the way of their agenda.

“Congress is working to try and rein in spending -- how about pointing that out?” Van Hollen told The New York Times on Tuesday. “It’s important that they more clearly distinguish between what Democrats in Washington stand for and what Republicans in Washington stand for.”

It's an especially frustrating place for House Democrats, who have by and large been warriors for the president's agenda, casting tough votes on a variety of issues, including some, like the climate-change bill, that aren't likely to even be taken up by the Senate this year. After all that hard work, they rankle at what they see as the president's failure to present a choice to the electorate.

"We are Democrats, and one of the benefits of our party is that people are able to share their very strong feelings about these issues," White House Deputy Press Secretary Bill Burton says of the debate. He is confident that voters will see a clear choice between the parties in November. But while the president has shown consistency in rebutting attacks on his own policies (recall the health-care debate), his support for Democrats in Congress has been focused on fundraising -- which, to be sure, is no small part of the effort.

"We've got a president who does a lot of things well," says a senior Democratic aide, who requested anonymity to discuss the issue. "Confrontation is not one of them. They are trying to figure out how to do that and protect the brand."

With six months until the election, the disagreement hasn't flared into a major obstacle to the party's political efforts. Both sides see the White House starting to make its presence felt, particularly during the debate on Wall Street reform, when he criticized Republican Leader Mitch McConnell in his weekly address. Congressional Democrats also praised the DNC -- indeed, Kaine has recently turned up the contrast, asking CNN's John King, "Do you want to keep climbing? Or do you want to hand the keys back to the guys who put us in the ditch?"

The real question for nervous congressional Democrats is whether Obama will amp up the partisanship over the coming summer and motivate the coalition that brought him and his party to victory two years ago. But there is the tension, dating back to the very start of the 2008 campaign, between the president's post-partisan idealism and his tenacious, organizing-focused political sense. Once again, Obama is being Obama, moving more slowly -- or, his allies say, with a broader vision -- than his colleagues, who simply want to know which Obama will show up to the midterm campaign.

"I'm just hoping they realize this before it's too late," the senior Democratic aide says. "Too late is 2011."

[Demeter]

9. New “Gold to Go” ATM Launches By Rocky Vega

http://dailyreckoning.com/new-gold-to-go-atm-launches/

On the run and need a quick 10-gram bar of gold? It’s no problem if you live in Abu Dhabi, or are just crashing at The Emirates Palace… a $10,000-a-night luxury resort.

OK, maybe it’s not a problem you run into very often. It still sounds like an impressive innovation.

According to CNBC:

“With gold prices at record highs amid fears that the EU’s rescue package will drive inflation higher, the ATM monitors the daily price of gold and offers small gold bars that weigh up to 10 grams with customized designs.

“This could be just what those who stay in one of the world’s most expensive hotels will need as they watch the euro, yen and dollar jump around in volatile trade…

“…Thomas Giessler, the German entrepreneur behind the idea, chose Abu Dhabi because of its high-rolling atmosphere. Geissler said he hopes his Gold to Go machine will tie in nicely with the region’s traditional ties in gold commerce.”

Leave it to a high-end Abu Dhabi hotel to be a first-mover in this fast food version of hard money delivery.

While US bankers continue to draw ire as they hone their expertise at weaving dollars (as opposed to gold) out of straw, a golden ATM is just the kind of financial innovation that is pretty easy to get behind.

[Demeter]

66. Gold price hits record as investors shy away from euro

http://www.csmonitor.com/Money/2010/0512/Gold-price-hits-record-as-investors-shy-away-from-euro

Gold surged to a record price on Wednesday, as investors rushed to hedge against possible erosion in key currencies such as the euro.

The metal has gained as a debt crisis in Europe has pushed the euro down by nearly 8 percent in the past month against the US dollar. Although strength in the dollar is often bad for gold, many investors are wary of America's fast-rising public debt, as well as Europe's.

"Gold prices are soaring because of growing inflation fears," Peter Morici, a University of Maryland economist, wrote in a report Wednesday. "Both the European Central Bank and the Federal Reserve seem to be on the path to permanently easy money with the Greek bailout and huge US budget deficits."

Gold may not quite be the "new black" in fashion, but it has reasserted itself this week as the most basic currency unit known to the world.

It's a haven in times of financial or geopolitical crisis. The US dollar also vies for that role, and in the past year, economists speculated that the euro would rival the dollar as a reserve currency. But now, with investors focusing on the risks that lie in sovereign balance sheets, metals like gold and silver have become a core holding for more investors.

Gold traded as high as $1,245.80 per ounce Wednesday, and contracts for June delivery settled at $1,243.10 an ounce, according to financial news services.

Some metals analysts predict a continued rise in gold, while others say the metal is near a peak.

In the more bullish camp, analysts at Bank of America Merrill Lynch see gold hitting $1,500 an ounce by late 2011.

A more pessimistic view comes from Capital Economics in Toronto, which predicts gold will drop below $1,000 an ounce by the end of this year.

Much of the debate centers around the economy and inflation. A strong economic recovery could buoy commodities in general, including gold. (Merrill Lynch sees oil going above $100 a barrel next year.) Inflation, by eroding the purchasing power of a currency, can send investors fleeing to gold or other hard assets...

[Robbien]

86. The gold bars these atms sell are ten ounces

If I were a thief, that's an atm I would watch. Anyone using it would be walking around with a fortune in his pocket.

[Demeter]

10. The Mysterious Stagnation of M2 Money Supply By The Mogambo Guru

http://dailyreckoning.com/the-mysterious-stagnation-of-m2-money-supply/

I always make sure that I have taken all my pills before I look at the end-of-month money supply figures, which turned out to be a good idea, because M2 growth has been, as they say, quite anemic for the past several months.

I think it’s bad news, which seems paradoxical because I am always screaming my head off about how inflation in the money supply is a bad thing, because inflation in the money supply causes inflation in prices, which is The Thing To Be Feared (TTTBF) because that is going to destroy us, and yet here I am whining in Real Mogambo Terror (RMT) because the money supply is NOT increasing, thus apparently proving, as my wife says, that I “cannot be pleased.”

Perhaps you realize that this must be bad news because you, too, are dizzy from the unexpectedness of it all, as you would think the money supply would be going To The Freaking Moon (TTFM), what with Fed Credit still increasing at almost $20 billion a month, the national debt taking a monstrous leap of $184 billion in April alone, and Consumer Installment Debt actually going up by a few billion in March, which is not to mention the creations of money around the world as central banks around the world are creating the money around the world so that governments around the world can deficit-spend, deficit-spend, deficit-spend, spend, spend!

But, as any child can tell from looking at the chart or the numbers, the M2 money supply is not going TTFM, and is kind of stuck at $8.512 trillion. Hmmm!

I decide to do a little detective work, and soon find, perhaps not coincidentally, that the S&P 500 index is back to where it was in 1998, giving investors, on average, literally zero nominal gain from the stock market after 12 years of faithful investing, and (appallingly) less than that – less than zero! – after deducting the fees, costs, expenses and taxes paid by the investors.

Naturally, I am on my feet in a Predictable Mogambo Outrage (PMO), yelling “This proves, once again, that the majority of investors must lose money and/or buying power so that a small minority of investors, if any, can make a small profit, which they usually can’t do, either, after paying taxes, fees and expenses, and especially after deducing the loss of buying power of each dollar that occurred between the time they bought the asset and when they sold it, meaning that, in this case, they have lost about a third of their total buying power since the BLS itself calculates that $1 in 1998 has the same purchasing power as $1.34 today, thanks to the damnable Federal Reserve creating so much money! So they would have to have had a 50% gain, instead of zero gain, just to get even!”

I look around and notice nobody is listening, so I mutter sarcastically under my breath, “Hahaha! Nice investing, suckers! Just remember to ‘invest for the long term!’ Hahaha!”

And then I remembered about the wisdom of buying gold, silver and oil, and I chuckled anew, only this time with a cozy satisfaction that, “Whee! This investing stuff is easy!”

[Demeter]

11. A 14-Month Low for the Euro By Chuck Butler

http://dailyreckoning.com/a-14-month-low-for-the-euro/

Front and center this morning, the euro (EUR) has lost more ground overnight, falling to a 14-month low, trading below 1.25 for the first times since March of 2009. Recall, that in March of 2009, the risk assets turned on a dime, and it wasn’t too far into spring that everyone was dumping dollars again… But that was then…

You know… I have to wonder where all these guys were that are now saying this, that and the other thing about a collapse of the euro, a year ago… Shoot Rudy, six months ago! But, that’s the thing that brings these guys out of the woodwork… When an asset begins to go down, the beating begins, and doesn’t stop, until someone says, “that’s enough!”

Having said that… I just keep thinking about the euro aid package… Yesterday I told you that I believed that the aid package was not helping the euro, but instead other risk assets. Well… The more I think about this, the more I come to the realization that maybe, just maybe, this is the beginning of the end for the euro as the offset currency to the dollar… I DID NOT SAY IT WAS THE END OF THE EURO! I said, the end as the offset currency to the dollar… Which would bring the euro back to pre-2002. If you remember those days, the euro fought for every inch of credibility it could get… That could be the euro’s future once again unless the Eurozone parliament axes the PIIGS (Portugal, Italy, Ireland, Greece and Spain)… And stood on the solid ground of Germany, France, Austria, Netherlands, Finland, Belgium and a few others.

There is a way for the Eurozone officials to throw a lifeline over the Union… And that is to gain taxing power over all nations in the Union… Then… They would be like states of the Union… But I don’t see that happening, any time soon.

You know… The traders, and hedge fund managers, and investors of the world really have blinders on, right now, with the focus on the debt problems of the European Union’s bad boys… But shoot Rudy, why not take the blinders off and see the whole debt picture?

Looks like the Bank of England’s Governor Mervyn King has taken his blinders off… King was pointing out last night that the US has many of the same problems haunting Europe… Hey, Mervyn… You are now my new “Mr. Obvious”! But, you do get a gold star for taking the blinders off, and trying to point out that this debt problem is not just a Euro problem…

I’ll give you an example of the garbage we see in print and on the cable news here in the US… Yesterday, the Weekly Initial Jobless Claims printed… And the headline on the news story that came across my screen said, “US Claims fell to 444,000 last week”… Now, if you weren’t a reader of the Pfennig, and know better, someone might read that and say, WOW! Thinking that “fell” meant by a huge amount…. But in reality, the number “inched down” by 4,000… That’s it! Give me a break!

While I’m on the US and their own debt problem, which is far greater than the total of debt problems in the Eurozone, but don’t let that get in the way of a dollar rally.

The CBO (Congressional Budget Office) has just concluded, for example, health care reform will cost the federal government much more than originally projected.

With new health care legislation, US federal deficits will exceed $1 trillion for many years to come, even with repeal of the Bush tax cuts for families over $250,000 and the interest and dividend tax. The President’s pledge not to raise taxes on families under $250,000 puts Washington in a fiscal box… You think? Yes… I know it does!...

[Demeter]

12. US Could Benefit From Fewer Financial Engineers, More Real Engineers By Rocky Vega

http://dailyreckoning.com/us-could-benefit-from-fewer-financial-engineers-more-real-engineers/

This week, manufacturing and transportation executives met at a Reuters Summit in Chicago to discuss ongoing problems in the sector and the economy. They also reflected on the frighteningly lightning fast 1,000 point drop and rebound in the Dow that was likely caused by algorithm-driven trading.

Manufacturers argued that they must operate within a tight regulatory framework, for safety and other reasons, while the financial services industry seems to have free reign to unleash whatever economy-threatening instruments that bonus-driven bankers can dream up.

According to Reuters:

“Several executives said days of market turmoil also made them feel all the happier to work in an industry that relies on hard assets and well-trained workers, where value cannot evaporate quite so quickly.

“‘When I came out of business school 26 years ago, I made a very important career decision that I wanted to work for an industrial company and I haven’t regretted that one time in the last 26 years,’ said Jim Griffith, CEO of bearings maker Timken Co (TKR.N). ‘Not in 2008 when we were at record levels of demand or in 2009 when we were at the bottom of the economy.’

“In the week that followed the dramatic plunge in share prices, U.S. stocks have recovered most of their earlier losses. After the wild market swings of the past two years, executives said they have learned to take wild share fluctuations in stride.”

The manufacturers voiced a need for greater regulation in financial services, more on par with what they have to contend with. Yet, the reality is that trying to regulate financial innovation is a much more complicated undertaking. It’s also a sector where government regulators have the potential to do a lot more harm than good.

The second point addressed by the group has more merit. The US manufacturing sector does sometimes compete in the same math-oriented labor market as financial services. In it, smart students must weigh career choices like these two against one another. In this case, they choose between the allure of quick money and prestige in the banking sector versus lower-paid and more traditional work in engineering. You can see why it’s a tough sell.

[Demeter]

13. Manufacturers say it's time to rein in Wall Street

http://www.reuters.com/article/idUSTRE64C2UO20100513

Manufacturers don't always understand Wall Street's game, but after still-unexplained events nearly wiped out a trillion dollars in market value, they say it's high time for more regulation of financial services.

The U.S. economy has become far too dependent on financial wizardry, a shakier foundation than the nuts and bolts of building excavators and jet engines, executives said this week at the Reuters Manufacturing and Transportation Summit in Chicago.

"The scary part about what happened in the market last week is that no one seems to know why," said William Zollars, chief executive of YRC Worldwide Inc (YRCW.O), the largest U.S. trucking company. "That is frightening, because that means it could probably happen again."

Last Thursday's dramatic sell-off -- which briefly pounded the Dow Jones industrial average .DJI down almost 1,000 points, the biggest one-day intraday drop in its 114-year history -- is a clear sign that lawmakers need to get a tighter grip on the market's workings, executives said.

Officials from the U.S. Securities and Exchange Commission and six major U.S. exchanges agreed this week that new safeguards were needed to prevent a repeat of the incident, in which effects were magnified immeasurably by computerized orders that chased the major averages down at lighting speed.

"It's hard to argue against" financial regulatory reform in light of that incident, Zollars said.

ENGINEERS VS. MBAS

While most major U.S. industrials are dependent on Wall Street as the surest conduit to the billions of dollars in investment they need to finance factories, executives voiced little faith in the Wall Street minds that created the obscure financial instruments that fueled the housing bubble and subsequent brutal economic downturn.

"There are all those kinds of gimmickry kind of investment practices, as you know, that goes on today," said Daniel Ustian, chief executive of Navistar International Corp (NAV.N), which makes heavy trucks. "The ones that had the gimmickry, they either got killed or they made a lot of money."

Engineering and manufacturing skill has become undervalued

in a nation captivated by the promise of easy riches that investment banking until recently promised, he said.

"I know what it takes to run a successful, complex company that makes something that people buy versus some other companies that are doing trading," Ustian said. "I don't know what the skill level of that is, obviously there's some technical skill, but I'll match them up to any of our engineers any day."

NEED FOR CLARITY

Heavy industry in the United States faces a raft of regulation covering everything from how factories prepare for fires to how long truck drivers can be at the wheel. In part, that's because decades of practical experience has made it very clear to lawmakers what risks assembly-line workers face and the public danger poorly used or maintained heavy equipment can pose.

But the speed with which Wall Street turns out new financial instruments may have surpassed regulators' ability to keep up, executives said.

"I don't think the financial world is as well understood as perhaps it could or should be," said Ron DeFeo, CEO of Terex Corp (TEX.N). "There are a number of aspects of the financial markets that could use greater transparency."

Even manufacturers that operate their own finance businesses -- like Caterpillar Inc (CAT.N) -- think some reform is needed.

"There's a huge consensus in the country and even in the business community that we need financial regulatory reform. It was certainly inadequate in the last very difficult period we've gone through," CEO Jim Owens said. "I think we need serious regulatory reform."

Several executives said days of market turmoil also made them feel all the happier to work in an industry that relies on hard assets and well-trained workers, where value cannot evaporate quite so quickly.

"When I came out of business school 26 years ago, I made a very important career decision that I wanted to work for an industrial company and I haven't regretted than one time in the last 26 years," said Jim Griffith, CEO of bearings maker Timken Co (TKR.N). "Not in 2008 when we were at record levels of demand or in 2009 when we were at the bottom of the economy."

In the week that followed the dramatic plunge in share prices, U.S. stocks have recovered most of their earlier losses. After the wild market swings of the past two years, executives said they have learned to take wild share fluctuations in stride.

Martin Richenhagen, CEO of Agco Corp (AGCO.N) who owns shares in both his own company and rival Deere & Co (DE.N), said he does not read too much into single-day market moves.

"I was surprised," the German executive allowed. "Was I scared? Not really. Because you also learn that there is a certain disconnect between your stock price and the company's performance."

[Demeter]

15. Good Money After Bad By Bill Bonner

http://dailyreckoning.com/good-money-after-bad/

Where do bad debts go after they die?

On Monday, investors seem to have convinced themselves that they just disappeared…like Amelia Earhart or TARP funds. But by Tuesday, they began to worry about ghosts.

As in the US, the specter haunting Europe is debt. In America, bad debt in the private sector – led by subprime mortgages – caused havoc on Wall Street in the autumn of 2008. It was as if all Hell had broken loose. The feds rushed to the rescue; but what could they do? They could not exorcise the evil spirits. They could only move the debts from one debtor to another – putting at risk an additional $8 trillion of the taxpayers’ money.

Now it is the Europeans’ turn to save the world. Their financial authorities had been seen as weak and reluctant. But last weekend, they were as bold and as bumbling as a crusader. Europe’s debt is in the public sector – the debt of the subprime states around Europe’s periphery. The $1 trillion bailout program calls for transferring this debt onto the taxpayers of the larger, more solvent states.

Rescues sometimes have happy endings. Households, companies, and even governments…with enough self-discipline and some luck…can sometimes be pulled back from the brink. But they must be at the brink, not beyond it.

Much is being made, for example, of Ireland. When world markets turned down in 2007, the Emerald Isle faced ruin. Like Britain and America, it had overdone it. Its banks, its households and its government had too much debt. At the brink, it took a knife to public spending, pledging to cut 7.5% of GDP out of the government’s budget. There was some grousing and complaining. But generally, the Irish seem to be taking their surgery with good grace.

An important detail: it was not too late. The Irish have a national debt equal to only 50% of GDP – about a third of the Greek total. Roughly, with a modest GDP growth of only 2.5% annually the Irish could sustain their debt indefinitely. If they stick to the program, the debt problem could disappear.

There is also the example of South Korea. The Koreans faced disaster during the Asian Debt Crisis of 1997-’98. The banking sector had lent too much to the nation’s conglomerates. When the latter couldn’t pay, the former were in trouble. Emergency loan programs were put in place. The conglomerates were forced to merge, sell, or scale back. Most remarkably, the South Koreans showed a spirit of solidarity that revealed an alarming lack of cynicism. In 1998 the government began a campaign called “Collect Gold for the Love of Korea.” Millions of people voluntarily turned in their gold jewelry in order to help the government pay off foreign loans.

South Korea was the best performing economy before the crisis. It was soon the best performing economy again. The national debt never rose about 30% of GDP and soon ceased to be a worry.

But how about the great European bailout? Will it make the debt problem go away? We will waste no time pussyfooting around the issue: ‘No’ is the answer. Many of the debts passed the brink between the living and the dead a long time ago. There is no way they can be revived. Europe is wasting its blood transfusions on a corpse.

The problem with Europe is that some of the peripheral states can’t keep up with the interest on the money they borrowed. Greece, for example, is scheduled to have debt equal to 150% of GDP by 2011. Even at 5% interest, it will take GDP growth of 7.5% per year just to keep up with the interest payments. Since growth in Greece is not expected to come in anywhere near 7.5%, and will probably even be negative, it will sink further into debt. There are no reasonable assumptions you can make that show how Greece could ever repay the current debt, let alone more of it. The debt has gone bad. It is dead. It cannot be revived or repaid.

Bad debt doesn’t disappear. Europe’s leaders have merely passed it along to a broader audience. Now, the ghost of Greek, Portuguese, Spanish – and all the bad debt of the subprime borrowers – haunts the whole continent. And it will not go to its eternal rest until it is satisfied.

How do you satisfy a bad debt? The lenders – the bondholders – should write it off as soon as possible. Instead, the new bailout follows the pattern of modern macro finance. Small debts become big ones. Problems in the present are pushed into the future. And people who deserve to lose money are protected, while the public takes the loss.

It is hard to imagine how European leaders could have done worse. Money is transferred from the private sector to the public sector, where returns on capital typically are far lower and often negative. Walking debtors are allowed to borrow more, with no hope that it will ever be repaid. Overall, debt increases, as debt from the bailout is added to the original debt. Future industries are deprived of the capital now being re-allocated to bankrupt governments. And by paying off the bondholders, the government directs capital to people who obviously don’t know what to do with it.

The ghosts multiply until pandemonium takes over.

[Demeter]

16. Uncle Sam IS the Mortgage Market By Addison Wiggin

http://dailyreckoning.com/uncle-sam-is-the-mortgage-market/

A few other markers of continued troubles in the housing market for you:

First, Zillow reports 23% of homeowners with mortgages were underwater during the first quarter. Nearly one-third of homes sold in March sold for less than the sellers paid

Second:



Mortgage Market Nationalization

In the first quarter, 96.5% of all new mortgages written were backed by either Fannie Mae, Freddie Mac or the Federal Housing Administration. A trend that’s been in place since the top of the housing bubble in 2006 has reached its logical conclusion.

The mortgage market in the US has been effectively nationalized.

[Demeter]

56. Fannie Mae asks for $8.4bn in aid

Fannie Mae, the large, government-owned mortgage finance company, reported a first-quarter loss of $11.5bn and said it would need to ask the Treasury Department for an additional $8.4bn as home loans continued to go bad at a record pace
Read more >>
http://link.ft.com/r/73UJGG/72WTAY/06MUC/8AY0CS/KESAQF/28/t

[Demeter]

18. I am being dragged off to socialize

please continue filling in this thread...I won't be gone too long, I hope.

I've never done anything like this for at least 35 years....and I hate bands, but my friend is grieving and she wants to get away from it all for a while.

And do contribute art and such to the theme: life, death, immortality!

[ozymandius]

21. What a nice thing to do for your friend.

Have your self some fun. :party:

[Demeter]

24. Well, I'm Back

The band finished at 9:30 PM Guess they roll up the sidewalks precisely at 10 in Ann Arbor, just like Toledo, Ohio! (I know that's not true. but it was peculiar).

http://www.youtube.com/watch?v=86FRyKBVTsw

John Denver--he's one of the Immortals, now.

[hamerfan]

22. Who better to

symbolize art as life, death and immortality:

[Demeter]

26. You Betcha! Shakespeare Had Lots To Say!

About money:

Polonius:

Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Hamlet Act 1, scene 3, 75–77

Hamlet:
Thrift, thrift, Horatio, the funeral bak'd-meats
Did coldly furnish forth the marriage tables.

Hamlet Act 1, scene 2, 176–181

On life and death:

Macbeth:

To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day,
To the last syllable of recorded time;
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player,
That struts and frets his hour upon the stage,
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

Macbeth Act 5, scene 5, 19–28

Marcus Antonius:

Friends, Romans, countrymen, lend me your ears!
I come to bury Caesar, not to praise him.
The evil that men do lives after them,
The good is oft interred with their bones;
So let it be with Caesar.

Julius Caesar Act 3, scene 2, 74–77

and Immortality:

Iago:

Good name in man and woman, dear my lord,
Is the immediate jewel of their souls.
Who steals my purse steals trash; 'tis something, nothing;
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed.

Othello Act 3, scene 3, 155–161

[ozymandius]

45. Did you say 'death'?

I'm sorry, I meant 'Mr. Death'.

[Tansy_Gold]

82. Dave Fisher has been rowed to the other side

http://articles.latimes.com/2010/may/13/local/la-me-david-fisher-20100513

Dave Fisher dies at 69; founding member and lead singer of the 1960s folk group the Highwaymen

His recording of the Civil War anti-slavery song 'Michael, Row the Boat Ashore' became a surprise pop hit in 1962.
May 13, 2010|By Randy Lewis, Los Angeles Times

Dave Fisher, founding member and lead singer of the 1960s folk group the Highwaymen, whose recording of the Civil War anti-slavery song "Michael, Row the Boat Ashore" became a surprise pop hit in 1962, has died. He was 69.

Fisher died Friday at his home in Rye, N.Y., of myelofibrosis, a rare blood disease, family friend Nicole Fiftal said Wednesday.



http://en.wikipedia.org/wiki/Michael_Row_the_Boat_Ashore


As this song originated in oral tradition, there are many versions of the lyrics. It begins with the refrain, "Michael, row the boat ashore, Hallelujah." The lyrics describe crossing the River Jordan, as in these lines from Pete Seeger's version:

Jordan's river is deep and wide, hallelujah.
Meet my mother on the other side, hallelujah.
Jordan's river is chilly and cold, hallelujah.
Chills the body, but not the soul, hallelujah.<5>

The River Jordan can be viewed as a metaphor for death.<6> According to Allen, the song refers to the Archangel Michael.<7> In Christian tradition, Michael is often regarded as a psychopomp, or conductor of the souls of the dead.<8>



http://www.youtube.com/watch?v=4b1uGEYuSC8
(Comments are well worth reading, with kleenex)


This was one of the first songs I learned to sing harmony on.

R.I.P. Dave, milk and honey on the other side.





Tansy Gold

[DemReadingDU]

103. I remember that song

Never realized who originally sang it


edit to add
http://tinyurl.com/273tlax

[Hugin]

93. "Out, damned spot! out, I say!" -- Lady M.

How fitting a theme for the afterglow of Empire... The telling of the events we've witnessed over the past few weeks is fare for The Bard.

I'm not typically one to heap irony upon tragedy, but, there is a pop-up on this link.

Savor it... :evilgrin:

[Demeter]

97. I couldn't get the pop-up

even after enabling foxfire and reclicking.....

[Hugin]

100. "What need we fear who knows it, when none can call our power to account?"

"Yet who would have thought the old man to have had so much blood in him?" -- Lady M.



How odd... and now there's an NPR banner at the top of the page. Oh, well... Never mind that focus instead on the MacB. Shakespeare could have written it yesterday.

[xchrom]

20. Recommend

[Demeter]

47. Thank you!

We win them over, one blogger at a time....

[Demeter]

27. The 2004 Fed Transcripts: A Methodical, Diabolical Destruction of America’s “Wealth”

http://dailyreckoning.com/the-2004-fed-transcripts-a-methodical-diabolical-destruction-of-americas-wealth/

The Federal Reserve releases transcripts of the Federal Open Market Committee (FOMC) meetings with a five-year lag (as required by law, the Fed would like to burn them). Transcripts for 2004 meetings were released on April 30, 2010. The Dow Jones Industrial Average fell 998 points on May 6, 2010. The 2004 transcripts help explain why the Dow could have disappeared last week.

The Setting

To refresh memories, the Fed had cut the fed funds rate to 1.00% in June 2003. America leveraged up on free money (“free,” since inflation was higher). The mortgage boom etched itself on the national conscience. The 2004 FOMC meetings were filled with discussions of whether and when the Fed should tighten. (“Tighten,” meaning, raise the funds rate from 1.00%. Raising the rate should tighten, or restrict, access to credit.) The result of FOMC talk was to increase the funds rate after each of the FOMC meetings, starting in June through the end of the year. Each time it was raised by 0.25%. In practice, this is the Fed’s minimum rate change. The FOMC raised the funds rate to 1.25% in June 2004, to 1.50% in August, to 1.75% in September, to 2.00% in November, and to 2.25% in December. It would continue with a total of 17 consecutive 0.25% boosts, until the funds rate reached 5.25% in June 2006. This gave the impression the FOMC was walking on eggshells.

FOMC transcripts in 2004 confirm the Fed was afraid of markets. Its concerns about the economy were only a derivative function of how market volatility could disrupt consumer spending. (Over 100% of economic growth after the post-2001 recession had been consumer spending.) The Fed understood rising asset prices boosted consumer spending. As I discuss below, the FOMC was not simply fixing short-term interest rates. It was now interfering with long-term interest rates, the stock market, and the housing market. This distorted the entire structure of prices through the economy and we know how it ended – no better than the Politburo’s central planning.

In 2004, the FOMC knew that when it raised the funds rate, financial markets might exhibit any number of unintended consequences. In June, Chairman Greenspan stated a policy change to avoid such turmoil: “By committee desire, we have been changing the funds rate only at meetings. That was not the case in the past.” He wanted the markets to know it could rely on the Fed’s constancy.

The FOMC seemed most concerned that higher rates might interfere with the carry trade. In the sad tale of The Financialization of the United States, the carry trade deserves a chapter. It received one in "Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession." Chapter 10: “Restoring the Economy: Greenspan Underwrites the Carry Trade, 1990-1994,” discusses the unique recovery from the 1990-1991 recession. Never before had the U.S. economy resurrected itself through finance rather than industry. To accomplish this amazing feat, finance flooded the banking system and hedge funds.

The Federal Reserve had cut the funds rate from 9.75% in 1989 to 3.0% in 1992. Quoting from Panderer to Power: “Speculators borrowed at a cheap rate – such as a Treasury bill, yielding 3%. They bought higher yielding securities, such as Japanese government bonds that yielded around 6%. They expected (or hoped) the borrowed asset would not rise in price. They leveraged the 3% spread at 10:1 or 100:1. Up to the present, the carry trade has funded fortunes in New York, London, Tokyo, and Shanghai.”

By 2004, the carry trade was a mammoth enterprise of hedge funds and banks. The too-big-to-fail banks were, by now, leveraging their own internally managed hedge funds, managing their own proprietary trading desks, and also lending to highly leveraged hedge funds. Leverage, and, the belief that access to rising levels of credit would never end, pushed up asset values on bank balance sheets – whether real estate, bonds, stocks, or private-equity. This increased the banks’ lending capacity which encouraged banks to lend more. Hedge funds and private-equity funds (that were leveraging their acquisitions into bankruptcy) could not, or would not, refuse free money. Rising asset prices boosted mortgage origination, refinancing, home-equity withdrawal, prices of mortgage securities and lines-of-credit from commercial and investment banks to unscrupulous mortgage lenders. Markets believed asset prices would only go up for many silly reasons. Belief in the Greenspan Put may have been the silliest but also the most influential. (The Bernanke Put today is even sillier.)

The FOMC’s Manipulation of Asset Prices

Federal Reserve Governor Donald Kohn stated the FOMC’s mission at the March, 2004 meeting: “Policy accommodation – and the expectation that it will persist – is distorting asset prices. Most of the distortion is deliberate and a desirable effect of the stance of policy. We have attempted to lower interest rates below long-term equilibrium rates and to boost asset prices….”

It is worth pausing here. Kohn told his confreres that Federal Reserve policy was to distort asset prices. He also said this was deliberate and desirable. In other words, distorted asset prices were not an unfortunate consequence of such-and-such Fed policy. The Fed’s goal was to distort asset prices.

Kohn went on: “It’s hard to escape the suspicion that at least around the margin some prices and price relationships have gone beyond an economically justified response to easy policy. House prices fall into this category , as do risk spreads in some markets and perhaps even the level of long-term rates themselves, which many in the market perceive as particularly depressed by the carry trade….” Summarizing, Kohn believed the Fed had deliberately set a policy that raised house and long-term bond prices beyond a “justifiable response” to the 1.00% fed funds rate. (One justifiable response to free money is a price of infinity, but Kohn was not of that persuasion.) Second, Kohn thought the carry trade was reducing yields on long-term Treasury bonds. (As follows: when a trader borrows $1 billion at 1% and buys $1 billion of 10-year Treasury bonds that yield 4%, prices of the 10-year bond go up as the yield goes down.)

At the January 27-28, 2004, FOMC meeting, Fed Governor Roger Ferguson voiced his own fears, about the state of financial markets: “During the intermeeting period , we saw quite a run-up in the prices of equities…. During the same period, interest rates dropped quite significantly. Risk spreads have come down…. This may indicate an underappreciation of the risks that may be imbedded. Frankly, to put it mildly, I think that the dollar carry trade has become extremely well entrenched and that the markets are looking to us perhaps more than they should be…. Perhaps we are anchoring the yield curve more than we’d like….I’m afraid the fixed income markets in particular are not in fact doing the appropriate job of pricing risks. We need in some sense to remove the anchor that we have placed on those markets.”

Greenspan did not agree. At the same January meeting, Governor Kohn said he did not think the FOMC should “second-guess asset price levels.” Kohn continued: “It’s something we didn’t do in the stock market run-up in the ’90s and I was pretty comfortable with how we handled that. So I’d be a little cautious about using monetary policy to try to damp asset price movements.” Greenspan replied to Kohn: “I certainly agree with that.” It is not clear if the chairman was agreeing to this obsequious compliment of Greenspan’s successful demolition of the stock market, but the chairman was affirming he wanted asset prices to move up and up and up.

As a more trivial matter, these conversations contradict Alan Greenspan’s recent attempts to rehabilitate himself at the Brookings Institute in March 2010, and before the Financial Crisis Inquiry Commission (FCIC), on April 7, 2010. According to the old humbug, the Greenspan Fed does not bear an iota of blame for “by far the greatest financial crisis globally ever” (Greenspan’s words). He claimed under oath before the FCIC that the Fed was blameless because the “house bubble, the most prominent global bubble in generations, was engendered by… long term mortgage rates” which “by 2002 and 2003… delinked from their historical tie to central bank overnight rates.” The italics were Greenspan’s. There are many pages in the 2004 FOMC transcripts where tactics to move or fix the 10-year Treasury yield are discussed. (For those who remember Greenspan’s “conundrum” – his inability to understand why long-term rates weren’t rising – this answers what most suspected. His protestations of bewilderment were a ruse.)

In 2004, the then-Fed chairman stated there was a direct link between Fed policy and long-term interest rates. At the September 2004 FOMC meeting, Greenspan said an issue on the table was “whether we should encourage lower ten-year interest rates….” He stated this would happen “if we do decide to pause later in the year, we will end up with lower long-term rates, higher bond prices, and presumably higher asset prices on the balance sheets of a number of financial institutions.” (A “pause,” in this case, would be to break from the established pattern of raising the funds rate at every meeting.) There was no question about it: “we will end up.” Yet, he told the FCIC this linkage no longer existed after 2003.

Dino Kos, Manager of the Fed’s System Open Market Account (at the New York Fed, which fixes the fed funds rate by trading with dealers), made an interesting observation at the March meeting: “If we talk to people who are active in, say, Treasuries, we hear a lot about the carry trade and about an expansion of risk and leverage.” It is not clear from reading the transcript, if Kos, or others, considered this to be good or bad. Speculative risk and leverage in the banking system would not normally be welcomed by the nation’s leading bank regulator (Greenspan), but neither was it desirable to slow down the mortgage carry trade. Such developments as Interest-Only and Negative-Amortization mortgages may have remained a niche market if not for speculators who were asking for more assets to buy with the money they had borrowed. (Dino Kos at the June 29-30, 2004 FOMC meeting: “Banks and hedge funds are still holding on to large positions in mortgage-backed securities.”) By 2004, Wall Street was funding and even buying subprime mortgage lenders to accelerate the flow of mortgage securities they sold, such as CDOs. In 2004, Lehman Brothers was the 11th largest subprime lender in the U.S. and the top issuer of subprime mortgage securities.

Greenspan: “We Created the Carry Trade”

At the September FOMC meeting, Federal Reserve Governor Susan Bies commented: “The whole process of reserve management has changed. This is a profit center in a bank….”

The Fed worked closely with the banks to help maximize these profits. According to Bies, this has “gotten a lot of credibility in the market and we need to be careful what we do…” Chairman Greenspan chimed in, drawing an analogy to another cooperative effort in which the Fed maximized profits of commercial banks: “For the same reasons we’ve created the carry trade, because if you lock in with some permanence one leg of it, that reduces the risk.”

There was never doubt that the Fed was aware, and possibly complicit, in the restructuring of America into a financial economy. It is noteworthy to discover that the Fed is so much more; such entrepreneurial spirit is unusual within government bureaucracies. Who guessed the pivotal role Alan Greenspan played in turning investment banks into proprietary trading desks; that the Fed created the carry trade? Certainly not the author of Panderer to Power. No wonder the man still commands six-figure fees for speaking engagements sponsored by banks and attended by hedge fund managers.

It is also interesting to read that this Public-Private Partnership “locks in with some permanence one leg of , that reduces the risk.” This evolution of the Federal Reserve’s responsibility has escaped legislative approval. It does not seem sporting to eliminate risk to speculators who can make $100 million a year when the trade works. (Long-Term Capital Management is an example of 100-to-1 leverage that failed.) Rather than an investment, this looks more like a racket.

Greenspan’s motives are always a quagmire of probabilities. It is better to operate from certainties and, in this case, it is certain he was caught in a trap with no good way out. He entered a pact with the devil when he created the carry trade in the early 1990s. By not allowing nature to take its course, the “real” economy could not heal. Finance drove steel piles into the ground and established a new foundation for the financial economy. The real economy slowly rusted while finance rose to the sky. Greenspan perverted the nation’s economic discussion during the second half of the 1990s with his productivity fantasy. Wall Street spread the Greenspan gospel and made fortunes from the Internet bubble.

The stock market collapsed in 2000 and 2001, which is the inevitable conclusion of such hallucinations. The girders of the real economy were wobbly by then – manufacturing jobs were disappearing at the fastest rate since the Great Depression. From March 2001, the official starting date of the recession, through the end of 2004, employment in the private economy fell by 1,200,000. Greenspan looked for a financial solution – the housing bubble. It was, in the larger sense, a credit splurge. This Godzilla had to be much bigger than the stock market fiasco, and it was. (The farther the economy deviated from its traditional foundation, the more credit needed to be created to forestall a collapse.)

At the 2004 meetings Greenspan – and the FOMC – were setting Federal Reserve policy not only by fixing short-term interest rates, but also by calibrating the carry trade. Conversations show the Committee understood the danger of expanding the trade: if it grew too large, a financial earthquake would crash the rising skyscraper to the ground. At the January 2004 meeting, Dino Kos talked about “the already rather steep yield curve , the 3 percent differential between the funds rate and the yield on the ten-year bond is historically wide, and further steepening probably would bring in new investors to take advantage of the carry.” The tone of Kos’ comment (measured by the direction of the meeting and questions being asked) seems to be that the 3% spread was about right. Less, and credit arteries might harden. More, and the Fed might not be able to contain the carry trade. The FOMC, interpreting Kos’ statement, should work towards holding the spread at 3%.

This was the same meeting at which Governor Ferguson had worried that “we are anchoring the yield curve more than we’d like.” The anchor was the short-term borrowing rate, the 3% spread to the long-term rate was the profit, after it was leveraged.

The FOMC was also tugging on long-term interest rates for reasons Chairman Greenspan discussed at the September meeting. He asked the question: “ we should encourage lower ten-year interest rates, given how close they are to levels that would prompt a lot of mortgage financings and a significant drop in duration in the mortgage market…?” His interest in mortgage refinacings was to boost consumer spending.

Consumer spending exceeded consumer income. This had to continue. Greenspan described the importance of rising asset prices in fooling the consumer at the November FOMC meeting: “We have a very significant problem with private saving. The household saving rate has come down dramatically and now is close to zero….The idea of having a negative savings rate is not out of line with the way the world works. Remember…the average household looks at the market value …of its equity holdings…. We can have a negative saving rate with a significant part of the population believing that they are saving at a fairly pronounced rate.”

This strategy of fixing asset prices at an artificially high rate to fool the American people into spending money they did not have was diabolical. It was even more so, given what Greenspan told the public. Before Congress on July 15, 2003, he claimed: “The prospects for a resumption of strong economic growth have been enhanced by steps taken in the private sector over the past couple of years to restructure and strengthen balance sheets….Nowhere has this process of balance sheet adjustment been more evident than in the household sector.” The man will say anything.

Conclusion

Greenspan is gone and his successor is also a man not to be trusted filling your gas tank. In 2004, when then-Federal Reserve Governor Ben S. Bernanke was still an underling to Greenspan, he demonstrated the lack of truth, common sense, and intelligence needed to be selected Fed chairman: “Increases in home values, together with a stock-market recovery that began in 2003, have …the expansion of U.S. housing wealth, much of it easily accessible to households through cash-out refinancings and home-equity lines of credit.” This is not “wealth,” but it was a sales pitch that may have convinced a perplexed audience to buy houses. That was in public. At the December 2004 FOMC meeting, Simple Ben showed an appreciation for why he was bamboozling the public: “As a result of rising stock and house prices, over the past year U.S. net wealth… has increased about $3.3 trillion, or around 30% of GDP. That’s a number which, incidentally, goes some way to explaining the continued strength of consumer spending.”

He consistently misunderstands the current situation. On November 16, 2009, he told an audience: “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.” How on earth can anyone think an economy run on a zero-percent interest rate – a fantastical plan never before attempted in recorded history – is A-Okay?

The manipulation of markets and of the American people has grown worse under Bernanke’s chairmanship. In the fall of 2009, Governor Kohn spoke at a Federal Reserve conference. He made it clear that the Fed still wants to fool the people into a state of poverty: “Recently the improvement, in risk appetites and financial conditions, in part responding to actions by the Federal Reserve and other authorities, has been a critical factor in allowing the economy to begin to move higher after a very deep recession…. Low market interest rates should continue to induce savers to diversify into riskier assets, which would contribute to a further reversal in the flight to liquidity and safety that has characterized the past few years.”

On March 27, 2010, former Federal Reserve Chairman Alan Greenspan told Bloomberg TV if not for the stock market recovery, the economy would be shrinking faster than Zimbabwe’s. That is an exaggeration, but he was drifting in that direction. From the horse’s mouth: “Ordinarily, we think of the economy affecting stock prices. I think we miss a very crucial connection here in that this whole economic recovery, as best as I can judge, is to a very large extent, the consequence of the market’s bottoming last March, and coming all the way back-up. It is affecting the whole structure of the economy, as well as creating the usual wealth effect impact.”

The 998 point drop in the Dow on May 6 was a warning to those who still invest in and trust markets. The government has permitted sophisticated strategies among a handful of operations to run the stock market. Program trading, high-frequency trading, and investment bank proprietary trading have replaced the buy-low, sell-high investor. At the August, 2004 meeting, Dino Kos reported: “In the past several months, quite a few traders have bemoaned the low level of volatility across a range of asset markets and the absence of perceived trading opportunities.” It would take a strong imagination to not believe the FOMC is just as solicitous and equally willing to anchor the risk of institutional traders today.

The Financial Times reported in January 2010 that only 3% of trading is retail. The traditional relationships by which common stocks are measured such as price-to-earnings ratios are not that relevant anymore. IBM’s price is more likely a reflection of a computer programmed to trade the stock because of a phrase spoken on CNBC. It is difficult to retain the pretense of markets reflecting the distilled knowledge of a company’s value. Caveat Emptor.

More importantly to those with money invested in public markets is the possibility of a 5,000 point drop in the Dow that does not recover, but converges on zero. Traditional diversification strategies such as separating stocks among small, large, domestic and foreign companies neglect protection. The Bernanke Put will fail and with it the greatest bubble of all will crash. This is the reason investors need to devise a personnel put strategy.

[Demeter]

28. US Debt and Deficit Numbers Overlooked by the Mainstream

http://dailyreckoning.com/us-debt-and-deficit-numbers-overlooked-by-the-mainstream/

$82.7 billion. That’s the deficit the US Treasury posted last month. That’s awful for April, which usually records a positive number, thanks to tax receipts flooding in around the 15th. Last year recorded a loss too. But that was only $21 billion. So this year, the bleeding is nearly four times as bad.

For the record, the government hasn’t posted a monthly surplus since that fateful pre-TARP month of September 2008.

That figure of $82.7 billion is merely the BS figure the Treasury puts out there when it reports the deficit. The real tell is how much the national debt grew. And in April, that figure was twice the size of the “official” monthly deficit – $175.6 billion.

We’re rapidly approaching a point of no return, says our friend Gene Steuerle of the Urban Institute. “Both liberals who want to maintain spending programs and conservatives seeking to keep taxes low seem to think – or, at least, want to think – that economic growth can once again solve our problems.”

No more. “In the past, fiscal imbalance was mainly a temporary, current issue only. Yes, congresses would occasionally spend much more than they collected in taxes, sometimes heedlessly. But as long as revenues over time rose with economic growth and most spending was discretionary, push never came to shove as long as the next congresses weren’t too profligate…

“Now so much spending growth is built into law in permanent or mandatory programs that these programs essentially absorb all future revenues.”

[Demeter]

68. Tax bills in 2009 at lowest level since 1950

http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm

Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found.

Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.

Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress. The real problem is spending,counters Adam Brandon of FreedomWorks, which organizes Tea Party groups. "The money we borrow is going to be paid back through taxation in the future," he says.

Individual tax rates vary widely based on how much a taxpayer earns, where the person lives and other factors. On average, though, the tax rate paid by all Americans — rich and poor, combined — has fallen 26% since the recession began in 2007. That means a $3,400 annual tax savings for a household paying the average national rate and earning the average national household income of $102,000.

This tax drop has boosted consumer spending and the economy, which grew at a 3.2% annual rate in the first quarter. It also has contributed to the federal debt growing to $8.4 trillion.

Taxes paid have fallen much faster than income in this recession. Personal income fell 2% last year. Taxes paid dropped 23%. The BEA classifies Social Security taxes as insurance payments and excludes them from the tax calculation.

Why the tax bite has eased:

• Stimulus law. One-third of last year's $862 billion economic stimulus went for tax cuts. Biggest reduction: The Making Work Pay tax credit reduced income taxes $800 for married couples earning up to $150,000.

• Progressive tax rates. Presidents Clinton and Bush pushed through a series of tax changes — credits, lower rates, higher exemptions — that slashed income taxes for poor and middle-class families. A drop in income now can trigger big tax breaks and sharply lower rates, sometimes falling to zero.

• Sales tax. Consumers cut spending sharply in this downturn, thereby paying less in sales taxes.

A Gallup Poll last month found that 48% thought taxes were "too high" and 45% thought they were "about right." Those saying taxes are "too high" remain near a 50-year low.

The lower tax burden should last at least through 2010, says Roberton Williams of the Tax Policy Center, a think tank in Washington, D.C. "Virtually all the stimulus tax cuts expire at the end of the year," he says. "So the key decision is whether to extend them into 2011."

[Demeter]

74. The wealthy won’t pay their taxes, so labor must do so. By Michael Hudson

http://www.informationclearinghouse.info/article25422.htm

Riddle: How are the Greek rioters like America’s Tea Party movement?
Answer: Both reject government being taken over by the financial oligarchy to shift the tax burden onto labor.

The difference is that the Tea Partiers have lost faith in government. This is just what the financial oligarchy wants, of course. Giving up hope of gaining electoral control to pursue a fair fiscal agenda, the Tea Partiers have abandoned the centuries-long fight for reform to make governments better by giving them the power to check predatory finance and wealth. Sliding to the right wing of the political spectrum and acting mainly out of frustration, they have succumbed to a utopian desire simply to shrink a government that they see acting adversely to their interests.

Financial lobbyists are using the Greek crisis as an object lesson to warn about the need to cut back public spending on Social Security and Medicare. This is the opposite of what the Greek demonstrators are demanding: to reverse the global tax shift off property and finance onto labor, and to give labor’s financial claims for retirement pensions priority over claims by the banks to get fully paid on hundreds of billions of dollars of recklessly bad loans recently reduced to junk status.

Bank lobbyists know that the financial game is over. They are playing for the short run. The financial sector’s aim is to take as much bailout money as it can and run, with large enough annual bonuses to lord it over the rest of society after the Clean Slate finally arrives. Less public spending on social programs will leave more bailout money to pay the banks for their exponentially rising bad debts that cannot possibly be paid in the end. It is inevitable that loans and bonds will default in the usual convulsion of bankruptcy.

Greek labor is not yet so pessimistic as to give up the fight. What it recognizes that its American counterparts do not is that somebody will control the government. If labor – the demos – loses its spirit, power will be relinquished to foreign creditors to dictate public policy by default. And the more the bankers’ interest is served, the worse and more debt-burdened the economy will become. Their gain is bought at the price of domestic austerity. Scheduled payouts by Greek pension funds and government social spending programs must be to replenish German and other European bank capital.

This worldview already has been delivered to Europe’s northernmost periphery, where it has elicited a fiscal masochism that banks hope to see in Greece. Having fallen on their swords, Baltic governments would be jealous and even resentful to see Greece rescue its economy where they themselves failed to repudiate arrogant creditor demands. “Seen from the eastern rim of the European Union, the looming austerity drive in crisis-afflicted Greece reads like old news,” writes Nina Kolyako.

“For almost two years, the Baltic states of Lithuania, Latvia and Estonia have brought in repeated draconian measures, slashing public spending and hiking taxes to try to dig themselves out of a hole. ‘We learned the lessons very painfully, heavily and effectively, that you need to look after the fiscal situation very carefully,’ Lithuanian Prime Minister Andrius Kubilius told AFP in a recent interview.

‘We understood very clearly that fiscal consolidation was the only way for us to survive.’”

Capitulating in a classic Stockholm syndrome (literally to Swedish banks in this case), Lithuania’s government dutifully tightened the screws so much that GDP plunged by over 17 percent. A similar plunge occurred in Latvia. The Baltics have slashed public-sector employment and wages, imposing poverty rather than the Western European levels of prosperity (and progressive taxation to foster a middle class) that was promised after the Baltics achieved their independence from Russia in 1991.

After Latvia’s parliament imposed austerity in December 2008, popular protest in January brought down the government (as a similar protest did in Iceland). But the result was merely another neoliberal “occupation regime” run on behalf of foreign banking interests. So what is unfolding is a Social War on a global scale – not the class war envisioned in the 19th century, but a war of finance against entire economies, against industry, real estate and governments as well as against labor. It is happening in the usual slow motion in which great historical transitions occur. But as in military conflicts, each battle seems frenetic and spurs wild zigzagging on the world’s stock and bond exchanges and currency markets.

All this is great news for computer program traders. The average commitment of funds lasts only a few seconds these days as financial markets are buffeted up and down by vast credit waves blown by the storms sweeping today’s financially overheating planet.

The coming economic dystopia

The Greek crisis shows how far the “European idea” has shifted from 1957 when the six-member European Economic Community (EEC) was formed. At U.S. prodding, Britain and Scandinavia created the rival seven-member European Free Trade Association (EFTA). Even so, the promise of Euroland – at least before Maastricht and Lisbon – was to elevate labor to middle-class prosperity, not to impose IMF-type austerity programs of the sort that devastated Third World countries.

The message to indebted economies is stark: “Drop dead.” And they are obediently committing economic suicide (emulating Japan in the 1985 Plaza Accords) to endorse the Washington Consensus – the class war of finance against labor and industry.

Political, social, fiscal and economic power is being transferred to the EU bureaucracy, its financial controllers in the European Central Bank (ECB) and the IMF, whose austerity plans and related anti-labor programs direct governments to sell off the public domain, land and subsoil wealth, public enterprises, and to commit future tax revenues to pay creditor nations. This policy already has been imposed on “New Europe” (the post-Soviet economies and Iceland) since autumn 2008. It is now to be imposed on the PIIGS (Portugal, Ireland, Italy, Greece and Spain).

No wonder there are riots!

For observers who missed Iceland and Latvia last year, Greece is the newest and so far the largest battlefield. At least Iceland and the Baltics have the option of re-denominating loans in their own currency, writing down their foreign debts at will and taxing property to recapture for the government the revenue that has been pledged to foreign bankers.

But Greece is locked into a European currency union, run by unelected financial officials who have inverted the historical meaning of democracy. Instead of the economy’s most important sector – finance – being subject to electoral politics, central banks (the designated lobbyists for commercial and investment bankers) have been made independent of political checks and balances.

In truly Orwellian fashion, right-wingers in Europe and the United States (such as Fed Chairman Ben Bernanke) call this the “hallmark of democracy.” It actually is the stamp of oligarchy, stripping away control over the economy’s credit allocation – and hence, forward planning – while giving high finance a stranglehold over public spending programs.

Iceland, Latvia and now Greece are the opening shots in the resulting global campaign to roll back the great democratic reform program of the 19th century and the Progressive Era: taxation of land and the “unearned increment” of price gains for real estate, stocks and bonds, and subordination of the financial sector to the needs of economic growth under democratic direction.

This doctrine was still being followed by the post-1945 era of progressive taxation that saw the 20th century’s greatest rise in living standards and economic growth. But most countries have reversed the fiscal trend since 1980. Tax collectors have “freed” income from public obligation only to see it pledged to banks for higher loans to bid up property prices.

Houses, office buildings and entire companies are worth whatever banks will lend. So populations (and corporate raiders) have responded to the pro-financial tax shift by borrowing to buy houses (and companies) before prices recede even further out of reach.

And taxes on labor now are about to be jacked up to pay off the public debts resulting from the asset-price inflation and financial wreckage that property tax cuts have helped cause. This is the cause of national debts. Governments have run into debt as a result of un-taxing the wealthy in general, not just real estate.

Following Western governments in shifting the fiscal burden off property and finance onto labor over the past few decades, Greece’s government is politically unable or unwilling to tax the wealthy, or even well-to-do professionals.

But neoliberals blame it and other debtor governments for not selling off enough public land and enterprises to make up the gap. Tax-deductible interest charges make privatizations on credit tax-exempt, so governments will lose the user fees they formerly received – while populations pay higher “tollbooth” charges for hitherto public services.

Just as the U.S. Government has done, it has issued bonds to finance the deficit resulting from these tax cuts. The buyers of these bonds (mainly German banks) are demanding that Greek labor (and now German taxpayers as well) should bear the burden of tax shortfalls. German and other European banks and bondholders are to be repaid at the social cost of drastic cutbacks in pensions and social spending – and if possible, by more privatization sell-offs at distress prices.

The riots in Greece have erupted because labor understands what most journalistic reporting shies away from confronting. Growth in real wages has slowed (and has stopped cold in the United States since about 1979). Home ownership has been achieved at the cost of new buyers taking on a lifetime of mortgage debt. And the post-Soviet economies won their political freedom from Russia, only to find themselves insolvent today, dependent on IMF and EU direction of their economies to obtain the loans to pay their foreign bankers that loaded down their housing, public enterprises, industry and families with debt.

Bondholders and financial speculators have ganged up to demand EU, IMF and US support for them to take their gains before the financial game crashes.

The grab can be done most quickly by shrinking economies under IMF-style austerity plans.

Unemployment is to rise while driving economies even further into debt – not only public debt as shrinking markets lead to falling tax revenue, but also foreign debt as import dependency increases.

Creditors are to be paid by letting them appropriate the economic surplus, in the form of debt service at the expense of new capital investment, infrastructure spending, public social spending and rising living standards. Economically, the Greek uprising is a revolt against the policy of sacrificing prosperity to pay foreign creditors in this way.

At the political level, the fight is to save Greece from being turned into an anti-state. The classical definition of a “state” or government is the ability to levy taxes and issue money.

But Greece has relinquished its fiscal authority to the EU and IMF, which are telling it to violate what political theorists list as the Prime Directive of any government: to act in the long-term national interest. The Greek government is being directed to act on behalf of bank capital, and indeed, that of foreign countries to engage in asset stripping, not to promote long-term growth.

At issue is whether nations will be run by creditors or by popular aims to reap the benefits of economic growth. An oligarchic push for IMF-EU loans to bail out foreign banks and bond speculators at the expense of Greek labor (the intended taxpayers of the future) aims at making labor rather than finance capital take the loss of government arrears resulting from un-taxing wealth. The aim is to enable foreign banks to avoid having to pay the price for acting as enablers in draining the domestic market. Government policy is to be taken out of the hands of voters and subordinated to the IMF and EU acting as instruments of international finance.

This creates a state of affairs in which neither Greece nor the EC are “states” or “governments” in the traditional political sense. The EU and IMF bureaucracy is not elected. And at the point where their foreign-dictated financial plan succeeds, the economy’s capital will be stripped and social democracy will collapse.

Bailout costs Merkel

On Sunday, May 9, German voters expressed their anger at the government’s role in bailing out German bankers (euphemized as bailing out “Greece”) at the expense of German taxpayers. The European Central Bank is not creating free euro-money but is billing national governments.

The Social Democrats overtook Chancellor Angela Merkel’s Christian Democratic Union party in North Rhine-Westphalia.

Winning only just over a third of the vote – a bit less than the Social Democrats (and down over 10 percentage points from the last election, of which 4 points were lost just in the last week when the bailout package was promoted by Ms. Merkel) – the CDU lost its majority in Germany’s upper house.

Many German voters may have wondered whether taxing the poor to pay the rich to engage in usury was really as “Christian” as the party claimed to represent. Or maybe they were concerned that Germany’s tax collector is to pay nearly $30 billion as its share in the bailout of bankers – not all of whom are beloved in Germany, even when they are German. And some no doubt saw the game as a financial deception by the banking sector’s compliant politicians.

The deception

Europe’s financial lobbyists used the crisis as an opportunity to promote a broad series of bailouts. For Swedish and Austrian banks, the EU approved a €60bn extension of the balance-of-payments facility already put in place to help Hungary, Romania and Latvia keep current on their debts to Austrian and Swedish banks respectively. To circumvent the Eurozone’s no-bailout principle, this special bailout law is based on Article 122.2 of the EU treaty permitting loans to governments in “exceptional circumstances.”

If we give Ms. Merkel credit for understanding the economics at work, then we must accuse her of lying through her teeth. The Baltic debt problem is chronic and structural, not “exceptional.” Ms. Merkel also must know that she is being deceptive in pretending to help Latvia by extending loans that the EU limits explicitly to support the lat’s exchange rate, not for domestic development. The foreign exchange is to cover the cost of Latvians paying mortgages in euros to Swedish banks, and of Latvian consumers buying food and manufactures that EU governments subsidize while leaving the Baltics in a state of economic and financial dependency.

Latvia thus is being victimized, not helped. The aim is to give Swedish banks a little more time to keep collecting payments on loans that are going to go bad in due course. Foreign exchange spent in facilitating private debt service to foreign banks becomes a national debt, to be paid by Latvian taxpayers.

This EU loan thus is an exercise in naked neo-colonialism.

Will the belated shift of German voters to back the Social Democrat red-green coalition with the Green and Left parties do much to stem matters? Probably not. Greek President Papandreou acquiesced in the cave-in despite being head of the Socialist International. So the question is whether Greece really is checkmated, destined to see its public spending, pensions, health care, schooling and living standards rolled back in the way that the Baltics have experienced. They have been an experiment in neoliberal central planning. If they are an example of what the future is to bring, the world will soon see a wave of Greek emigration, Baltic-style.

That evidently is what stock markets around the world anticipated when they soared on Monday morning at the news of Europe’s trillion-dollar bailout.

What really was bailed out is the principle that economies should be stripped so that finance capital may rule.

But the fight surely is not yet over. It will escalate for the remainder of the 2010s, because it is nothing less than an attempt to roll back the history of the 19th and 20th century’s struggle to replace the power of vested property and financial interests with principles of progressive taxation and public enterprise.

Is this where Western civilization really is supposed to be leading? Confronted by parliaments controlled by aristocracies, the 19th-century reformers sought to take them over on behalf of democracy. Classical political economy was a reform program to tax away the “free lunch” of land rents, monopoly rents and financial interest extraction. John Maynard Keynes celebrated this program in his gentle term, “euthanasia of the rentiers.”

But the vested interests have fought back. Calling social democracy and public regulation “the road to serfdom,” they are trying to set Europe’s economies on the road to debt peonage. Making an end-run around national elected governments to impose the Washington Consensus, IMF and EU institutions have gained fiscal and economic control over governments and their tax policies to cut taxes on wealth – and borrow from it to finance the resulting fiscal deficits.

America’s Tea Partiers and anti-tax rebels have given up the fight to reform governments. Squeezed by debt from which they see no escape, they demand lower taxes – and are willing to see the highest brackets become the major beneficiaries in an even more regressive tax shift. Faced with the corruption of Congress by lobbyists acting on behalf of the vested interests, they reject government itself and seek safety in local gated communities.

They see Congress and parliaments throughout the world losing autonomy to the IMF, the EU and other Washington Consensus organizations seeking to impose austerity and shift the tax burden onto labor and industry, off property and off predatory finance.

The only way to prevent a regressive tax shift and debt squeeze is to gain control of governments on behalf of the spirit of classical economic and Progressive Era reforms. At least, that is what Greek labor is rioting for. Someone must control government, and if democratic forces withdraw from the fight, the financial sector will tighten its trip.

Last week is still only the beginning of how this drama will play out. The response by the post-Soviet economies, which have retained their own currencies, is to come this summer and autumn.

Michael Hudson is Chief Economic Advisor to the Reform Task Force Latvia (RTFL). He is the author of America's Protectionist Takeoff. His website is www.michael-hudson.com

References
“Austerity drives are old news for Baltic States,” Baltic Course, May 10, 2010.

“Governments to control loan guarantee scheme,”, Ben Hall, Financial Times, May 10, 2010.

[Demeter]

29. The European Bailout Absurdity: Money for Nothing By James Howard Kunstler

http://dailyreckoning.com/the-european-bailout-absurdity-money-for-nothing/

The European Union came up with a trillion-dollar bailout for itself at the dawn’s early light yesterday. Initially, the bailout plan goosed the euro back above $1.30. But by day’s end, the euro’s value had gained almost no ground whatsoever. Hardly a resounding success on Day One of the campaign.

I mention this event reluctantly, knowing how averse we Americans are to news out of Old Europe, that boring backwater of sclerotic cafe lay-abouts, socialistic train service, and less-than man-sized portions of things that real men don’t eat anyway.

The question begging itself here, of course, is how Europe intends to come up with roughly a trillion in bailout money. Sell Portugal to China? Cut Greece up into bait and catch whatever fish are left in the Mediterranean Sea? Frankly, I’m stumped. Talk about robbing Peter to pay Paul… All the European nations are already so hopelessly enmeshed in chains of unfulfillable counter-party obligations that the bailout might as well be a game of musical chairs played in the Large Hadron Particle Collider, set to the tunes of Karlheinz Stockhausen. The European bailout is, in fact, an absurdity. I predict that the effect of the announcement will last all of one trading day on the stock markets.

The truth is that the imbalances of global finance are so grotesque now that the whole money system is hanging together with nothing but spit and prayer. I get rafts of e-letters every week warning of a supposedly-coming global currency – a companion idea to the notion of a one-world government. Both are fantasies. Events are taking the nations of the world in the other direction: towards break-up, downsizing, down-scaling. Likewise, if major currencies such as the euro and the dollar blow up, they’re much more likely to be replaced by more local bank-notes backed by gold than by some hypothetical Amero or Globo-buck.

Early yesterday morning, the European stock markets were zooming, and Bloomberg even carried a wonderfully mysterious headline saying Greek Bonds Rally. That was especially rich – like, who the hell is going to load up on Greek bonds now? Is there a pension fund somewhere run by such dimwits that they would sell their positions in the Goldman Sachs issued Wolverine CDO in order to get in on the new bargain in ten-year Greek sovereigns? I hope those pensioners are prepared to spend what remains of their lives selling chestnuts from pushcarts on the streets of Oslo.

As if life in the USA wasn’t surreal enough last week…

Once upon a time, the stock market was a place where people with capital went to look for productive activity to invest in – say, a company devoted to making soap flakes, or an underpants factory. Now the market is a robot combat arena where algorithms battle for supremacy of the feedback loops. Thursday’s still-baffling fifteen-minute “crash” was an excellent demonstration of the diminishing returns of technology. People too-clever-by-half, aided greatly by computers, have now gamed the investment indexes so successfully that these markets no longer have anything to do with investment – they’re just about shaving micro-points of profit at high volumes by micro-milliseconds off mere differentials in… math! This is truly quant heaven, a place where only numbers matter and there is no correspondence to anything in the real world. In other words, last Thursday’s bizarre action was a warning that the American stock markets have become certifiable.

These algo-robots may be elegantly complex, but they are really no more than triggering mechanisms, and Thursday’s – whatever it was – glitch, let’s say, ought to be regarded as a mere preview of the coming attraction: a spontaneous capital combustion in which the putative contents of these stock markets get sucked into a black hole so vast that the trading desks will have to find a way to arbitrage infinity to ever again catch a glimpse of America’s receding wealth. And it could all happen in a finger-snap… But probably not tomorrow.

Until then, rest assured that whatever else is going on out there, credit default swaps never sleep.

[Demeter]

30. EU Bailout Footnote: Currency Swap Lines Reopened By Ian Mathias

http://dailyreckoning.com/eu-bailout-footnote-currency-swap-lines-reopened/

The Federal Reserve has reopened currency swap lines with the European Central Bank. A quiet footnote to yesterday’s EU bailout announcement, the Fed and ECB said – without the support of a single voter or representative – that they would restart a market manipulation program that ended February 1st, 2010.

“This is a ready source of liquidity,” Dave Gonigam, my 5 Min. Forecast colleague explains, “for the ECB to follow through on its promises to buy up both sovereign and private debt as part of this ridiculous rescue package. How much liquidity? We don’t know, since the linchpin of the whole thing is an utterly opaque off-balance sheet entity totaling 440 billion euros.”

There’s plenty more little mundane details neither central bank will be sharing, like:

* How greatly will this program expand the Fed’s $2.3 trillion balance sheet?
* Will the Fed demand collateral?
* If so, what kind? (They accepted mortgage backed securities here… What’s next, Greek bonds?)
* Will the US money supply increase? By how much?
* What lending rates will the Fed charge?
* How will the proceeds be allocated?

“This is all designed to prevent a Soros ‘92/Bank of England style showdown,” Rob Parenteau explains. “The ECB cannot print the foreign currency it will need to sell in order to keep the euro from free fall. Hence they are trying to present a credible threat by enlisting foreign central bank assistance via swaps.

“However, by preventing further euro depreciation, eurozone exporters will not get as much benefit. There’s only been a 15% decline from euro highs so far. They need more like 30% or more to regain global market share. And so the odds that swings in the current account balance will offset fiscal retrenchment enough to generate a return to economic growth over the next 2 years are slim to none.”

[Demeter]

31. US Could See a Debt Downgrade as Early as 2013 By Rocky Vega

http://dailyreckoning.com/us-could-see-a-debt-downgrade-as-early-as-2013/

As if money were no object, the US has joined European nations to help salvage what’s left of a currency union that’s hit the skids.

The US is helping to finance the EU bailout in two ways. First, in the form of a massive currency swap line it’s extending to EU countries to support increased dollar demand. Second, in cash the US has paid for its roughly 17 percent membership stake in the IMF… funds which are at least partly being loaned out now to support Europe. Yet, financially speaking, the US is in a fairly poor position to be helping out other nations.

From Investor’s Business Daily:

“There is no obvious threshold beyond which investors will demand higher real yields for holding U.S. debt. Vague warnings from ratings agencies about the loss of America’s ‘AAA’ status haven’t added much clarity — until recently.

“In the wake of the financial crisis and recession, Moody’s Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.

“The key data point in Moody’s view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody’s managing director Pierre Cailleteau confirmed in an e-mail.

“Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects. But under more adverse scenarios than the CBO considered, including higher interest rates, Moody’s projects that debt service could hit 22.4% of revenue by 2013.”

Certainly systemic risk is a factor to be considered, and there are real concerns about contagion across the pond. Nonetheless, at some point all nations — the US included — must face the consequences of irresponsible fiscal policy. However, no matter where in the world financial crisis strikes, the US ends up at least partly holding the bag.

[Demeter]

32. U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody's

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490

Spiraling debt is Uncle Sam's shock collar, and its jolt may await like an invisible pet fence.

"Nobody knows when you bump up against the limit, but you know when it happens it will really hurt," said fiscal watchdog Maya MacGuineas of the Committee for a Responsible Federal Budget.

The great uncertainty about how much debt is too much has tended to make fiscal discipline seem less urgent, rather than more. There is no obvious threshold beyond which investors will demand higher real yields for holding U.S. debt. Vague warnings from ratings agencies about the loss of America's 'AAA' status haven't added much clarity — until recently.

In the wake of the financial crisis and recession, Moody's Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.

The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail.

Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects.

But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.

"While we see limited risk of a U.S. sovereign debt downgrade in the next 2-3 years, beyond that we cannot be so certain," wrote Societe Generale's economics team in a recent report.

The Moody's ratings framework is one that could have a significant influence on policy — particularly in a crisis.

Because debt levels and interest rates can't be lowered overnight, the obvious way of staying within the AAA limits set by Moody's would be to raise revenue.

"It would bias the remedy in favor of tax increases for countries that want to improve their bond rating," said Brian Riedl, budget analyst at the conservative Heritage Foundation.

Because economic growth is a key to fiscal health, Riedl argues that a ratings agency concerned about whether bondholders are repaid should bias spending cuts over tax increases.

Moody's says that its framework focuses on debt affordability rather than debt levels as a percentage of GDP. "The higher this ratio (interest/revenue), the more public debt constrains the formulation and delivery of other policies," Moody's analysts wrote in March.

&docId=532490&caption=

[Demeter]

33. Goldman’s Perfect Quarter By Eric Fry

http://dailyreckoning.com/goldmans-perfect-quarter/

– While the European Central Bank (ECB) was busy manipulating markets and making headlines Monday, Goldman Sachs was quietly revealing a different story of market manipulation…or something that walks and quacks very much like a market manipulation duck.

In an SEC filing, Goldman disclosed its first-ever “perfect” quarter. The firm’s proprietary trading desk navigated the first quarter without producing a single day of losses, the first time it had accomplished such a feat.

How is this possible? Please permit us to offer a simple explanation: It’s not.

Imagine a poker player who competes against skilled competitors for 63 sessions of 6 1/2 hours each, then walks away with a profit after all 63 sessions. Would that be possible? Not unless the poker player is holding a stack of aces up his sleeve. But Goldman accomplished this improbable feat. Its trading desk turned a profit on each and every day of the first quarter – that’s 63 trading sessions of 6 1/2 hours each, not counting whatever additional shenanigans Goldman was conducting in foreign markets.

There is something wrong with this picture…very, very wrong. And yet, Goldman trumpets this success as an example of something that is very, very right. “This is the first time we have reported zero trading loss days in a quarter,” crowed Samuel Robinson, a Goldman Sachs spokesman. “We believe it shows the strength of our customer franchise and risk management.”

An alternative interpretation would attribute Goldman’s uncanny trading success to the strength of its “political franchise,” subsidized risk-taking and various forms of de facto front-running. If, as James Howard Kunstler asserts, the US stock market has become “a robot combat arena where algorithms battle for supremacy of the feedback loops,” Goldman Sachs must control the “Supreme Combat Robot.” But we wonder whether this robot is abiding by all applicable securities laws, or vaporizing them with his special “Mega-fraud laser beam.”

“If you ever wanted to see what a monopoly looks like in chart form,” jokes Tyler Durden from Zero Hedge, “here it is:



Daily Trading Net Revenues

“The firm did not record a loss of even $0.01 on even one day in the last quarter,” Durden says. “The statistic probability of this event is itself statistically undefined. Goldman is now the market – or, in keeping with modern market reality, Goldman is the ‘house,’ it controls the casino, and always wins. Congratulations America: you now have far, far better odds in Las Vegas that you have making money with your E-Trade account.”

In fairness to Goldman, JP Morgan also produced a perfect quarter of proprietary trading. Morgan Stanley, the relative loser in the crowd, managed to produce a trading profit on only 93% of its trading days.

“The rape and pillage of the middle class was not isolated to Goldman,” Durden continues. “JP Morgan also had a flawless quarter. And if the odds of Goldman making 63 out of 63 are virtually impossible in any universe in which risk goes hand in hand with return (but in those in which monopolies are encouraged and bailed out), the coincidence of the two main firms that control the world having a perfect track record is impossible. And since things in reality tend to be zero sum, when everyone makes money, someone may be tempted to ask the question, just who is losing money? And the answer, dear taxpayers, and clients, is you.”

Perfection is either a religious virtue or a devilish fraud, dear reader; it is never a financial market reality. So there’s something a little troubling about the perfection achieved by Goldman’s (and Morgan’s) trader-bots. In fact, there might be something a lot troubling about their trader-bots, as well as their investment-bank-atrons.

Perhaps the truth will come to light in the fullness of time…or in the details of a future SEC complaint.

Goldman acknowledged in Monday’s SEC filing that it still faces a large and diverse number of criminal and quasi-criminal investigations. In addition to a bevy of investigations by the SEC, Goldman is facing detailed probes by the Justice Department, the Financial Industry Regulatory Authority and the UK’s Financial Services Authority related to CDO offerings and related matters.

“We anticipate that additional putative shareholder derivative actions and other litigation may be filed, and regulatory and other investigations and actions commenced against us with respect to offering of CDOs,” Goldman’s filing somberly disclosed, “ could result in collateral consequences to us that may materially adversely affect the manner in which we conduct our businesses.”

Hmmm…we’d guess that the list of “collateral consequences” would include reducing Goldman’s trading success from 100% to something much lower. And since trading revenues accounted for 80% of Goldman’s revenue in the first quarter, we’d guess that much lower net profit will be another “collateral consequence.”

[hay rick]

48. Add Citigroup and BOA to the "perfect quarter" list.

http://www.businessweek.com/news/2010-05-11/-perfect-quarter-at-four-u-s-banks-shows-fed-fueled-revival.html

“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California- based Institutional Risk Analytics. “It’s a transfer from savers to banks.”

The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter...

[Demeter]

34. Europhoria By Dan Denning

http://dailyreckoning.com/europhoria/

Monday was the day the world’s capital markets turned into a giant fiat money casino. Consider yourself forewarned. You might be able to trade your way to profits in this market on the tide of easy money being printed now by the Federal Reserve and the European Central Bank (ECB). But the financial markets are setting up for the mother of all collapses.

Prior to last Monday, I had imagined that the end of the super-cycle in fiat money would take years to unfold. I’m revising my forecast. The end may be approaching even faster than I expected. The piecemeal nationalization of certain industries…the transference of private sector liabilities to the public sector’s balance sheet…the abrogation of contract in the form of defaulted mortgages that are not foreclosed on…and the ever-rising debt-to-GDP ratios were all signs that governments everywhere were sucking the life out of the economy to preserve the status quo, while simultaneously turning dozens of firms and institutions into zombies with no real productive economic future.

But Monday was a day that sent a bit of a chill down my spine. Granted, the ECB’s €750 billion bailout package did wonders for various financial markets. And if you’re a speculator – and especially a high-yield bond hunter – why not get on the gravy train? If the ECB is going to print money to buy public and private sector debts to “ensure depth and liquidity” in certain markets, it’s not a trend you want to fight. For now....

[Demeter]

36. Goldman details new Business Standards Committee

http://www.marketwatch.com/story/goldman-to-look-at-suitability-of-complex-products-2010-05-14?siteid=YAHOOB

Goldman Sachs Group Inc. unveiled details late Friday of a new Business Standards Committee that the firm has set up to bolster the investment bank's client focus and increase the transparency of its activities.

The new committee will review Goldman's business standards then make recommendations to the firm's board of directors and senior management.

One area of focus will be on the suitability of some types of complex structure products for different Goldman clients.

The committee will be headed by Gerald Corrigan, chairman of Goldman Sachs Bank USA, and Michael Evans, vice chairman of Goldman Sachs and chairman of Goldman Sachs Asia.

"We recognize that there is a disconnect between how we view the firm and how the broader public perceives our roles and activities," Goldman Chief Executive Lloyd Blankfein said in a statement on Friday. "This initiative is consistent with our obligation to ensure that our standards across our business activities are of the highest quality and represent the benchmark for our industry globally."

The Securities and Exchange Commission filed a civil fraud charge against Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 143.28, +0.05, +0.04%) last month, alleging that the firm didn't tell investors in a structured product known as a collateralized debt obligation that hedge fund firm Paulson & Co. helped put the deal together and was betting against it. Goldman has said it did nothing wrong, while Paulson wasn't charged.

In the wake of the suit, Goldman executives and top mortgage traders were hauled in front of a Congressional committee where they were criticized for client conflicts of interest....

I KNOW, I SHOULD HAVE POSTED THIS UPTHREAD WITH JON STEWART'S COMEDY SEGMENT....

[Demeter]

37. Lone money manager may have sparked plunge Reuters: Document shows money manager sold a large order

http://www.msnbc.msn.com/id/37151233/ns/business-stocks_and_economy

A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high frequency trader as many have suspected, but money manager Waddell & Reed Financial Inc, according to a document obtained by Reuters.

Waddell sold on May 6 a large order of e-mini contracts during a 20-minute span in which U.S. equity markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from CME Group Inc said.

Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity."

Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony Tuesday that it had found one sale was responsible for about 9 percent of the volume in e-minis during the sell-off in the U.S. markets.

The e-minis are one of the most liquid futures contracts in the world, providing holders exposure to the benchmark Standard & Poor's 500 Index. The contracts can act as a directional indicator for the underlying stock index.

No wrongdoing suggested

Gensler said there was no suggestion that the trader, who he did not identify, did anything wrong in only entering orders to sell. Gensler said data show that the trades appeared to be a bona fide hedging strategy.

The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs , Interactive Brokers, JPMorgan Chase and Citadel Group.

During the 20-minute period, 842,514 contracts in e-minis were traded while Waddell from 2 p.m. to 3 p.m. traded its contracts, CME said. The CME document did not provide a break-out of Waddell's trading during the crucial 20 minutes.

Overland Park, Kansas-based Waddell did not comment. CFTC also declined to comment.

A CME spokesman, who declined to comment on the document, said the Chicago-based futures exchange operator never discusses customer activity.

"We found no evidence of improper trading activity or erroneous trades by CME Globex customers," said CME spokesman Allan Schoenberg.

Waddell's contracts were executed at Barclays Capital and later given up to Morgan Stanley, according to the document.

CME said it spoke to representatives from both banks on May 6 and planned to speak to Waddell representatives the following day. The firm oversaw $74.2 billion in assets as of March 31.

Morgan Stanley told CME that it "did not have concerns regarding the activity," the document said, because Waddell "would typically use equity index futures to hedge macro market risk associated with the substantial long exposure of its clients."

Meltdown's apex

Gensler said the contracts were sold between 2:32 p.m. and 2:51 p.m., the height of the meltdown.

The market for e-minis on May 6 fell more than 5 percent in a little more than 5 minutes starting at 2:40 p.m. -- the height of the crash, the document said. The e-minis began to recover before stock prices turned higher.

An order the size of the Waddell contract would be a big trade to execute on a normal day, said a trader whose firm is active in S&P 500 futures market. About 50,000 contracts are typically traded in an hour, the trader said.

"To get rid of 75,000 contracts, that's a lot of trading even if the market is healthy," the trader said. "But when suddenly the market changes and there's not as many bids there to trade with, 75,000 is going to cause quite a shock to the market."

ANOTHER CANDIDATE TO JOIN JON STEWART IN THE COMIC RELIEF SUBTHREAD...

[Demeter]

38. Ten Things You Must Do by Karl Denninger

http://market-ticker.org/archives/1091-Ten-Things-You-Must-Do.html

....The last week's wild gyrations in the bond market have made clear that Bernanke and his "pals" are quickly losing control of the bond curve. Friday's selloff in 2s was particularly ominous as that money did not go into equities or precious metals - it simply "went". The 2year is commonly thought of as the "demarcation line" between the short and long end, so when I saw 2s get sold down the antenna went up in a major way.

It is one thing for people to flee the long end of the bond curve; that's bad. Its another for people to flee Treasury bonds in general - that's an unmitigated disaster. The auctions last week showed that there is an incredible appetite from foreigners for very short term government debt - 4 week to 52 week bills - where the indirect bidder activity was at or close to double historical norms. This, in the face of the incredible amount of issuance that is occurring, tells me that they're selling something to replace it with these short-term instruments. Friday told us what the "something" was.

Folks, we have taken the wrong road. At the fork in mid 2007 and indeed into 2008 when the fork was still accessible I wrote extensively on the path we had to take if we wanted to avoid at best a Japan-style flatline of the economy for years, and at worst something beyond the 1930s in terms of awful.

We have done nothing to rid ourselves of toxic debt. The implosion of the PPIP, the latest incantation of the "Super-SIV" (remember that?) makes clear: government will not force recognition of losses and thus the clearing of the market, as doing so would destroy too many who have bribed, er, made "campaign contributions", to the political sphere.

Worse, government not only took on these debts themselves (via The Fed and Treasury with their "support" programs) but continues to issue more and more debt to fund what is a categorically-insane federal budget - one that is, this fiscal year, going to run a deficit of some forty percent. To put this in perspective when George W. Bush was President many (myself included) were screaming about 10% fiscal deficits. Barack Obama proposes to run a deficit four times greater in percentage terms. Where are all the media and other pundits who were yelling about Bush's "deficits for war"? Silent, that's where, because this time the person doing it is a Democrat.

But math doesn't care about politics. Math IS.

As a consequence we will instead face the music that this debt overhang will impose on us, whether we like it or not. We have now transferred some $12 trillion in either liabilities or "promises" to The Federal Government, representing a tripling of the "public float" of outstanding debt and a doubling of the nominal amount...


So without further adieu, here's my list of 10 things you need to be doing now:

Stop listening to those who claim that "The Market is telling you the recession is ending/over." Baloney. What was the market telling you in October of 2007 when the SPX hit 1576? That everything was great and "subprime was contained", right? Any more questions on that piece of nonsense?

Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.

Stop spending more than you make - in fact, do the opposite - start saving. NOW. You need to be saving 10% of your gross income. Not net or "excess" - gross. These funds serve two purposes: an emergency fund (which you're likely to need) and if you have one already it will also serve as a fund to buy up assets that will be puked up when things get really bad. You don't get wealthy by selling to some other sucker - you get wealthy by buying when nobody has any money to buy - that is, by driving the hardest bargain you can imagine!

I've said it before but it bears repeating: have the ability to make it even if you lose your job. Most people say three months of reserves are necessary. I've said six months to two years, and I'll reiterate it. And reserves means cash, not credit. Parked in a credit union is ok - but be prepared to make that actual cash in a big honking hurry if you need to. How do you know if you need to? If and when the first Treasury auction fails, the market crashes below the 666 March low and/or a big bank fails, you need to.

Pull ALL of your business from ANY bank that has received federal assistance. The community banks and credit unions have been screwed by the crony government interests in two ways - first, by regulators allowing bankrupt banks to pay overly-large CD rates when they're insolvent (that's fraud on its face) and second by proposing to tax them through FDIC assessments to pay for the sins of the imprudent. Withdraw your consent and assistance - move your funds to a credit union or local community bank, but before doing so ask to see their financials and look specifically for over-leverage in commercial real estate and other development "assets". HIT THE BAD GUYS IN THE WALLET - THE ONLY PLACE THEY UNDERSTAND!

If you have assets in the stock market, and have thus enjoyed the rally off SPX 666, either sell or hedge that exposure RIGHT NOW. The upside risk is what - 10%? What's the downside risk? 50% or more. You can hedge effectively with PUTs which have gotten much cheaper as the VIX has fallen, or simply sell out and go to cash. In my opinion you're insane to play for another 10% gain when you may suffer a 50% loss, but that's my view. Just don't say you weren't warned if you do nothing and the collapse occurs!

Figure out what you're going to do if we suffer a "sudden stop" and be prepared to execute that plan. Consider what a collapse in trucking, for example, does to the food supply into major cities. This is a low-probability risk right now (perhaps 10-20%) but if it happens major cities will become free-fire zones within hours. A gun won't do you a damn bit of good when there's a potential rifle barrel sticking out of every window and the person behind it is interested in the bag of groceries you're carrying. You are not Rambo (and by the way, have you noticed that Rambo always goes after bad guys in some small, flat hellhole? Ever wonder why? With a sniper rifle poking out of every second window even John Rambo doesn't stand a chance.) Those who live on the coasts have hurricane plans. Everyone needs a "sudden stop" plan, and it must not rely on access to credit of any sort, because if "it" happens that access will disappear instantly. For people in rural America, this might not be that big of a deal. For those who live in big cities it is - and its something you probably haven't thought through to the degree you need to.

Don't count on metals. I know, I know, we're going to hyperinflate and gold is going to the moon. I have one question: Can you eat it, drink it, run your car on it, sleep under it, or screw it? No? That's a problem. A "sudden stop" is not a hyperinflationary event - it has good odds of being quite the opposite. God help you if you put your eggs in that basket and are wrong.

Acquire lawful means of self-defense. Your odds of being victimized are roughly 1 in 100 annually under normal conditions. What happens when its 1 in 5? Think it won't be? Ok, if doesn't really get bad then you spent money on something you don't need, but you still have it and can sell it (even if you take somewhat of a loss.) If you wait, and then decide you need it, what are the odds of being able to find a firearm? And by the way, weapons you don't know how to use in a competent and cool fashion if you need to are worthless or worse. This means range time and/or professional instruction, and both take time, effort and money. Again, this is called "hedging" - your life and property, this time (instead of your investment portfolio)

Figure out who your friends are - and aren't. This isn't about who you like. Its about who you can trust with your back - no questions asked. If things get bad the second-to-the-last thing you want to be is alone - right before being around anyone who is less than 100% trustworthy. Think about this point long and hard - this doesn't mean dumping acquaintances now, but it does mean knowing who you group with if you need to - and who you avoid.

[Demeter]

39. HE ELABORATES ON HIS THEME

http://market-ticker.org/archives/2319-Ten-Things-For-2010.html

The risk of a "sudden stop" event where the bond market tells the government to "piss off" has never been higher. A ratcheting up of the yield curve, when the average maturation of government debt is now just under 4 years, could easily double interest expense in the budget. This would put the government in a nasty box: either curtail spending by twice that much (that is, roughly $800 billion) immediately or the addition to the deficit could force another ratchet higher in yield. This is a "death spiral" that can happen with amazing speed. If it does, everything you think the government should provide will disappear and asset prices - all of them - will collapse along with the economy...

Yes, I expected the game to end in 2009. I did not believe that our government could sell a net $1.5 trillion of new issuance (debt) for more than a year or so, nor could they roll over some $600 billion every month to keep the Ponzi going for long. They got away with it for two years, one more than I thought they would, but now cracks are appearing in this facade globally, not just here in the US.

The "powers that be" have done a fine job of trying to give the appearance of solvency. But you can't create solvency where it doesn't exist, and appearances don't last forever. We are now in the phase of this mess where recognition of the Ponziconomy of the 2000s is showing up not in bank stocks (bad) but in nations (ruinous.)

So with that behind us, let's update for 2010:

CNBS and other "media moguls" will not tell you the truth. They didn't in the "flash crash" of last Thursday and they won't next time. Remember that CNBS was running with a "fat finger" explanation for the collapse within minutes of the market stabilizing. That was utter and complete crap and anyone watching the markets knew it. I knew what happened immediately, and so did they. Listen to those who refuse to report the facts as they occur at your peril.

If you're not out of debt by now, you're about out of time. No, it is not a good time to buy a new car. No, it is not a good time to buy a new house (or an old house!) It is an especially bad time to crank up the credit cards. The illusion you have been given by the media and banksters that "all is well" is exactly what a shark would want as he entices you into the water after eating two of your best friends! I have warned for more than three years now to get out and stay out of debt, especially unsecured debt.

If you're a youngster graduating from high school or in college, do not, under any circumstance, take debt to continue your education. The collapse in the Ponziconomy for education has barely begun. But it will come and with it will come severe devaluation of your college education and tuition. If this means you have to go to a cheaper college or work while attending, then do so. Perform a strict cost:benefit analysis of your educational expenses .vs. expected earnings improvement .vs. a different career path. If it does not pencil out where you can recover the entire booked expense of college within 5-10 years, don't do it! Why 10 years at the outside? Because you must build in a risk premia and this is the easiest way to do so. Remember that the years you put into education are years you can't put into becoming entirely self-sufficient. If you bypass an economic downturn and come out the other side when the economy is recovering, you win. But if you come out of college with $40, 50 or $100,000+ in debt and can't get a job at anything close to enough to make the payments and remain solvent you are screwed. Further, be aware that student loans are the most-toxic debt of all, as they cannot be discharged in bankruptcy and as such the arrears of interest will be capitalized if you default, meaning the PRINCIPAL will grow without boundary, they WILL garnish your wages, intercept tax refunds and in general make your life a living hell. High Schools, Colleges and their "counselors" will not tell you this as they are fully-invested in feeding themselves. They're salesmen, not counselors, and you had best never forget that.

To repeat from last year: Save 10% or more of your gross income. We're not looking at hyperinflation folks, in my view - we're looking at a deflationary collapse. Cash is perfectly fine but make damn sure it's really cash and not some exotic "cash equivalent" that can get gated. This means, unfortunately, money market funds are no longer safe with recent changes to SEC regulations. If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them. Why? Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it. If you try to get around the tax man structure you're going to get creamed; governments can and WILL prevent that from working. My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you're wrong.)

If you're wondering if you have enough liquidity to survive you don't. The common "chestnut" is to have a couple of paychecks to three months worth. I have repeatedly said that I believe you need to be able to survive six to twelve months or more with no income of any sort. I meant it then and I mean it now, and those are minimums. Yes, I know this will draw guffaws. Ask those people who are rolling off 99 weeks of unemployment whether I was full of it or not when I said to have a year or more worth of liquid funds in 2007!

Last year I said to "sell or hedge risk" in the stock market. This year I say just sell and pocket the damn money. If you hedged, you forfeited the hedge cost but are WAY ahead on balance. If you sold at 950 you may be complaining of the 20% (to 1138) you didn't make from 950 but you booked a 42% profit off the 666 low. Who's complaining about a 42% return when you only had your money at risk for three months? If you hedged you got the entire thing but forfeited 5 or 10% of the profit for the price of the hedge. Again, what's to complain about? There is a possibility we may bounce again to another high, but you saw last Thursday, right? That risk is not only not gone it's not going to be gone. The claim of market "depth" and "liquidity" off the 666 lows was and is a lie. I have written extensively about this - about machines passing the same 100 or 1,000 shares back and forth, making it appear that the market is more liquid and deeper than it is. Lots of people laughed at me. Who's laughing now?

Get those "sudden stop" plans in place - NOW. If you're in a big city you're in big trouble. Find friends or relatives that aren't and see what you can do about a place to go where you have a reasonable shot at avoiding the worst of this. Look, all-out civil unrest (or worse) is a low-probability event but if you get trapped in a big city and the worst comes that city will go feral within hours and become a free-fire zone. What's worse, many of these cities are openly hostile to citizens having and using effective self-defense; the bad guys don't give a damn about laws - that's why they're called criminals. There really are bogey men in the world - they're called gangs folks, and they would love the opportunity that a breakdown that would come with such an event. In such a circumstance the only way to win the game is not to play. This is all about where you are, not what you have.

If you haven't acquired the means of lawful self-defense in whatever form or fashion you deem prudent at this point, the time to do so was yesterday. You need time and practice as you need competence - the biggest component of self-defense is the thing found between your ears, not the thing in your hand(s)! I know I've harped on this before but if you think you can go buy a gun when things get dicey and be "protected", having invested nothing in practice and/or training you are very likely to have that weapon taken from you and then be shot with your own gun. That's a crappy way to die; if you're unwilling or unable for whatever reason (including legal restrictions where you live) to acquire the means of defense then being concerned about the above (where you're going to go, how you're going to get there, and what you've got for supplies) becomes even more important.

About those friends I referenced in the last message on this topic: How many of them laughed at you? Seriously folks - questioning and belief is one thing, ridicule is another. An honest evaluation of who you can trust and who you can't is, in coming years, likely to be the most-important decision you will make, and you will make it time and time again. Being wrong over the last 20 years has cost you some money. Being wrong in the coming decade may throw you into rank destitution at best and cost you your life at worst. This is no laughing matter and there is no way around the facts.

This is a somber message on a day when order is being lost in the FX markets, and those, my friends, underpin literally everything. As I post this the same scenario that set up the collapse last Thursday in the FX is presenting itself again.

There is no guarantee it will produce another crash, of course, and in fact odds are it won't.

But the yellow light is on, and if we get another one of these things it is unlikely we will bounce at all - the market will just go straight down the toilet instead.

[Demeter]

41. ABOUT LAST WEEK....

Many people will have an interpretation of the magical bouncing DOW. I will compile them here.

[Demeter]

42. How Wall Street Can Win Back Confidence by Karl Denninger

http://market-ticker.org/archives/2010/05/13.html

I'll give you my answer - do all of the following:

No more "line-jumping" games. If I place an order my order goes to the end of the line at a given price. For instance, if I want to buy 100 shares of IBM @ 132.50 LIMIT and there are 10,000 shares at that price already on the book, my order goes behind the other 10,000. That's fair. But what the high-frequency trader guys will do is "load the stack" with orders they never intend to execute. I see this daily in the Globex (futures markets) with bids and offers that "magically disappear" as the price approaches the number. This is done because you can cancel an order instantly, but you must go to the back of the line when you enter one. You can never do this as a person as you're not fast enough - but the computers are, and they do. The result is that you the investor get screwed as the computers are basically always in front of you. The fix for this technologically in the current market is simple: All orders must remain valid for some reasonable period of time - say, 30 seconds, and cannot be canceled before that time expires. This makes such a strategy instantly unprofitable and stops the "line jumping" games. To prevent future "innovations" from figuring out how to get around this (again) the law must be changed to make intentionally issuing orders not intended to execute (that is, for the purpose of misleading the market, of probing liquidity or any purpose other than to actually buy or sell) a criminal (not civil) offense carrying felony penalties.

Bar trading with government-backstopped money. This means reinstating Glass-Steagall, in short. Gamble with your own money, not the government's and not the people's. Period.

The primary market controls. The "flash crash" occurred in no small part because when the NYSE went into "slow mode" other venues did not have to follow and in fact brokers were allowed to "route around" a working but intentionally slowed primary venue! That's BS and makes a mockery of NBBO, or National Best Bid and Offer - a key protection that investors have every right to rely on as it is published SEC policy and rule. Companies select the primary venue for their shares to trade and spend a lot of money to be listed there. They should set the rules, not Wall Street. If a company goes to NYSE for that listing in no small part for the specialist system, it should be honored everywhere - period - with violations not resulting in broken trades but rather the brokers required to make every investor harmed by same whole.

All instruments that are underwater must be backed with cash collateral at the end of every day, no exceptions, marked to market nightly. I don't care if you want to claim it's a "custom agreement" or whatever - I have to post margin every night against underwater positions and so does every other individual and small investor. To let Berkshire, Goldman, Bank of America or others "off the hook" because of "perceived" balance sheet strength is hogwash. I've had $100k of underwater positions but have many multiples of that in liquid net worth, yet I still have to post cash. Everyone should be equal in the market in regard to backing their bets. A big part of the "advantage" these big boys have is the ability to write essentially unlimited-size bets without recognizing the impairment in cash during any time they go underwater. That's the check and balance on excessive position size that every individual is required to observe, and it must be so for the large corporation as well.

All markets must be exposed if the securities are either issued by a public entity or are publicly traded - no exceptions. This means exchange traded, basically, with a central counterparty, so everyone can see bid, offer, size, open interest (in the case of derivatives) and last trade in real time. Everyone must have equal access to that data stream as well. "Dark Pools" and similar games must be barred.

Prosecute wrong-doers. There have been many. Blatant and obvious insider trading on various news events, unlawful front-running, allegations of firms selling securities to customers as "good investments" while in emails claiming they're "crap", "trash", "turds" and similar and more. All of these are frauds of various sorts. If I bilk the little old lady next door out of $2,000 I am prosecuted and might go to prison. These firms bilked investors out of trillions over the last 20 years and few if any of them have faced any sort of criminal or civil sanction. The public cannot trust Wall Street until the cops show up.

You want ordinary investors back in the market? Do the above.

Until that all happens Americans will (correctly) conclude that it is indeed a rigged game run by the big banks for the purpose of robbing them blind - and they're right.

[Demeter]

67. When in Debt, Do as the Debtors Do

http://dailyreckoning.com/ecb-monetary-policy-when-in-debt-do-as-the-debtors-do/

The euro-bailout stole the headlines Monday, while cheering investors around the globe - especially those investors who own the stocks and bonds of bankrupt nations. Greek, Spanish, Portuguese and Italian stocks all soared more than 10% on the day, as yields on high- risk sovereign debt plummeted.

Greek 10-year yields tumbled nearly 500 basis points - from 12.47% to 7.77% - as buyers rushed back into the market. But one has to wonder what sort of buyers these might have been. Were they: 1) The sort of buyers who sensed a bona fide buying opportunity; 2) The sort who sensed a bona fide short squeeze or; 3) Traders for the European Central Bank? Our guess would be #3, followed closely behind by #2.

In other words, almost every aspect of yesterday's trading looked like a great big short squeeze. Since investors around the world have been establishing hefty short positions in all things euro-related, the threat of a $1 trillion buyer for said assets was more than enough to send the shorts rushing for cover...or rather, TO cover.

"At the lightning speed that markets operate in today's world," says David Rosenberg, "this short squeeze could be over ...Recall the initial reaction to the TARP program ...a huge immediate relief rally of 11% that gave way to a 30% slide to the lows. The bottom was only turned more than four months later, once the kinks were worked out and the specifics of the stress tests were announced. Keep this in mind if anyone decides to extrapolate today's short-covering rally into the future.

"In the final analysis," Rosenberg concludes, "if the EU lends money to Greece or to any other problem country in the zone, debt ratios...in the region will only rise further. It will be interesting to see how the rating agencies handle this. It cannot be lost on them, or the global investment community, that while loans, guarantees and central bank provisioning can deal effectively with liquidity issues, they are ineffective in addressing what's really at stake here, which are structural fiscal issues. So the deal over the weekend is only going to be successful and so far as it is backed up by meaningful reforms...

"What is clear is that any rally in the euro should be shorted, because the line between fiscal and monetary policy has just become blurred. The cost of the ECB helping drive long-term yields in the periphery lower is jeopardizing the sanctity of the Central Bank balance sheet...Of all the knee-jerk bounces today, the euro is the one most vulnerable to a reversal."

Our only surprise here at The Daily Reckoning was that the trillion- dollar bailout announcement failed to resuscitate the euro or to suppress gold...even for one day. The short-covering rally in the euro produced very meager results. After jumping nearly 3% in early New York trading, the euro ended the day with a miniscule gain. Gold, on the other hand, dipped only slightly from the near-record highs it hit last Friday.

Apparently, investors deduce that the ECB's bailout scheme is inflationary, at a minimum. Somehow, some way, the ECB will conjure euros into existence that do not exist today. Thus, much like the Federal Reserve's activities during the last 18 months, the ECB will dramatically expand the supply of money and credit in an effort to "rescue" the euro.

Ironic, isn't it? Trying to defend the value of a currency by producing more of it? In all of this, gold seems likely to benefit.

[Demeter]

43. America's Ten Most Corrupt Capitalists

http://mltoday.com/en/subject-areas/commentary/the-debt-scam-844-2.html

I'LL JUST LIST THE MOST WANTED LIST--GO TO THE LINK FOR DETAILS:

1. Robert Rubin

2. Alan Greenspan

3. Larry Summers

5. Jamie Dimon

6. Stephen Friedman

7. Robert Steel

8. Henry Paulson

9. Warren Buffett

10. Goldman Sachs--which gave us


White House:

Joshua Bolton, chief of staff for George W. Bush, was a Goldman man

Regulators:

Current New York Fed President William Dudley is a Goldman man

Current Commodity Futures Trading Commission Chairman Gary Gensler has been a responsible regulator under Obama, but he was a deregulatory hawk during the Clinton years, and worked at Goldman for nearly two decades before that.

A top aide to Timothy Geithner, Gene Sperling, is a Goldman man

Current Treasury Undersecretary Robert Hormats is a Goldman man

Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist

Former SEC Chairman Arthur Levitt is now a Goldman adviser

Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man

COO of the SEC Enforcement Division Adam Storch is a Goldman man

Congress:

Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson

Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for Congress

Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman

And the list goes on.

[Demeter]

44. Well, that's enough spleen and slander for the night

not to mention if these crooks aren't immortal, at least they got their 15 minutes here.

See you in the morning with more bad news than you can stand...you say you want GOOD news?

http://www.youtube.com/watch?v=jT6JkceQ9FU&feature=related

Spike Jones, another immortal

[snot]

70. It's not slander if it's true.

[Demeter]

72. I wouldn't want to test that in court now

not in Looking Glass World!

[Demeter]

49. UK suffers hedge fund blow

European Union countries led by France and Germany plan to push through controversial new financial market regulations after turning down British pleas to defer a vote in Brussels
Read more >>
http://link.ft.com/r/6NPSBB/RNBFR4/6ADGM/WL28CG/GKI703/82/t

[Demeter]

50. Israel to curb leading business families

The Israeli government plans to crack down on the country’s leading business families, amid growing concern that the private sector is falling under the sway of powerful oligarchs
Read more >>
http://link.ft.com/r/6NPSBB/RNBFR4/6ADGM/WL28CG/UUTJYM/82/t

[Demeter]

51. Portugal unveils ‘crisis tax’ to cut deficit

José Sócrates, Portugal’s prime minister, announced tough new austerity measures, including a ‘crisis tax’ on companies and wages, to accelerate cuts in the country’s gaping budget deficit
Read more >>
http://link.ft.com/r/6NPSBB/RNBFR4/6ADGM/WL28CG/HDEM8I/82/t

[Demeter]

52. Spanish unions call public sector strike

Spanish trade unions called for a public sector workers’ strike and demonstrations against an emergency austerity plan, even as the government admitted that the measures would reduce already sluggish economic growth
Read more >>
http://link.ft.com/r/6NPSBB/RNBFR4/6ADGM/WL28CG/RNUQ5U/82/t

[Demeter]

53. Spain slashes civil service pay by 5%

Spain’s Socialist prime minister announces a 5 per cent cut in civil service pay as part of an accelerated plan to cut the country’s budget deficit
Read more >>
http://link.ft.com/r/QM42II/26ZHBL/SUO9T/XTABNH/C5X0FQ/AZ/t

[Demeter]

54. Ex-Glitnir investor faces $2bn action

Jón Ásgeir Jóhannesson, one of the main figures behind Iceland’s banking boom and bust, has been hit by a US lawsuit accusing him of a ‘massive fraud’ that led to the collapse of Glitnir bank
Read more >>
http://link.ft.com/r/QM42II/26ZHBL/SUO9T/XTABNH/C5X0RO/AZ/t

[Demeter]

110. Bankers jailed, sued as Iceland seeks culprits for crisis

http://www.google.com/hostednews/afp/article/ALeqM5hkg5VhwETJHWaiIqxwwj_PsHQ2Dg

More than a year and a half after Iceland's major banks failed, all but sinking the country's economy, police have begun rounding up a number of top bankers while other former executives and owners face a two-billion-dollar lawsuit.

Since Iceland's three largest banks -- Kaupthing, Landsbanki and Glitnir -- collapsed in late 2008, their former executives and owners have largely been living untroubled lives abroad.

But the publication last month of a parliamentary inquiry into the island nation's profound financial and economic crisis signaled a turning of the tide, laying much of the blame for the downfall on the former bank heads who had taken "inappropriate loans from the banks" they worked for.

On Wednesday, the administrators of Glitnir's liquidation announced they had filed a two-billion-dollar (1.6-billion-euro) lawsuit in a New York court against former large shareholders and executives for alleged fraud.

"I think this lawsuit is without precedence in Iceland," Steinunn Gudbjartsdottir, who chairs Glitnir's so-called winding-up board, told reporters in Reykjavik.

"It is about higher figures than we have ever seen," she said, adding that she expected Glitnir to file more lawsuits going forward, but that "it is unlikely any will be this big."

Glitnir said it was suing "Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir's chief executive, Thorstein Jonsson, its former chairman and other former directors, shareholders and third parties associates with Johannesson for fraudulently and unlawfully draining more than two billion dollars out of the bank."

The bank also said it was "taking action against its former auditors PricewaterhouseCoopers (PwC) for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the bank's collapse in October 2008."

Glitnir's suit, filed in the New York state Supreme Court on Tuesday, blamed most of the bank's woes on "Johannesson and his co-conspirators," who had "conspired to systematically loot Glitnir Bank in order to prop up their own failing companies."

Johannesson, the former owner of the now-defunct Baugur investment group with stakes in a number of British high street stores including Hamleys, Debenhams and House of Fraser, said he was shocked by the lawsuit.

"The distortions and the nonsense in the lawsuit are incredible," he told the Pressan news website.

Glitnir's administrators "can get a 10-year-prison sentence for misusing US courts in this manner," he insisted.

The bank's chief administrator Gudbjartsdottir took his comments in stride.

"I didn't expect him to be happy with the lawsuit," she said.

In addition to its New York suit, Glitnir said it had "secured a freezing order from the High Court in London against Jon Asgeir Johannesson's worldwide assets, including two apartments in Manhattan's exclusive Gramercy Park neighbourhood for which he paid approximately 25 million dollars."

Gudbjartsdottir said Johannesson had just 48 hours to come up with a satisfactory list of his assets.

"If he does not give the right information he faces a jail sentence," she said.

Four former Kaupthing executives, who all live in Luxembourg, have meanwhile been arrested in Iceland in the past week and Interpol has issued an international arrest warrant for that bank's ex-chairman, Sigurdur Einarsson.

Former head of the bank's domestic operations, Ingolfur Helgason, and former chief risk officer Steingrimur Karason were arrested late Monday on arrival from Luxembourg, just days after former Kaupthing boss Hreidar Mar Sigurdsson, along with Magnus Gudmunsson, who headed the bank's unit in Luxembourg, were taken into custody.

The 49-year-old Einarsson, who lives in London, said late Tuesday he had no plans to travel to Iceland to be arrested.

"I'm absolutely flabbergasted about the latest news," he told the Frettabladid daily.

"There is in my opinion no need for the arrests or custody rulings, and I will not of my own free will take part in the play that it appears is being staged to soothe the Icelandic people," he said.

"I'll put the human rights I enjoy here in Britain to the test and will not therefore come home (to Iceland) to these conditions without being forced," he added.

ICELAND IS TRULY THE MOUSE THAT ROARED!

[Demeter]

55. AIG chief says group will stay in profit

Robert Benmosche, AIG chief executive, says the US insurer would continue to earn a profit and pay back all of its obligations, including the $101.6bn it owes taxpayers
Read more >>
http://link.ft.com/r/UXDMSS/YHCUNR/EKRAI/HD3I4B/RNUIVU/LE/t

DOES THIS MEAN AIG IS IN ITS DEATH-THROES? LOOKING-GLASS SPEECH, IR TRUTH?

[Demeter]

57. Silk price soars as China’s farmland shrinks

The price of cocoons, the raw material for the fabric used in expensive items of clothing, has doubled since the start of 2009 as land available for mulberry trees falls victim to growing industrialisation
Read more >>
http://link.ft.com/r/73UJGG/72WTAY/06MUC/8AY0CS/HDE0X6/28/t

[Demeter]

69. China readies for launch of onshore CDS

http://www.risk.net/asia-risk/news/1635804/china-readies-launch-onshore-cds

China is gearing up efforts to launch an onshore credit default swap (CDS) market as the country seeks to gradually build out its financial derivatives markets. The creation of a credit derivatives market in the country is seen as an important step to enable Chinese banks to lay off risks that ultimately might reduce their need to tap capital markets to meet strict capital ratios as they expand their lending operations....

LESSONS LEARNED ONLY HALF-WAY


CDS REMIND ME OF THE CHILD'S CARD GAME "OLD MAID": WHOEVER IS STUCK WITH THE OLD MAID CARD AT THE END OF THE GAME, LOSES.

[Demeter]

58. Japan to develop green cities for India

Japan is to build three green cities in India to help Asia’s third-largest economy industrialise and raise urban planning standards
Read more >>
http://link.ft.com/r/M2ZOXX/LQ3754/MJTKN/KEUKY0/IYQVD1/E4/t

[Demeter]

59. Wolfgang Münchau: EU buys itself time

In the end, there was no choice. Faced with an existential threat, the European Union has demonstrated that it can act fast if necessary. European leaders deserve respect for finally getting ahead of the situation.

That said, we should also realise that by throwing money at the problem, mostly in the form of backstop guarantees, the EU has merely bought itself time to sort out the eurozone’s governance mess. The real test is yet to come.
Read more >>
http://link.ft.com/r/A1TNOO/72W1MG/YGZ3O/8AY63N/BMWHEN/ID/t

[ixion]

60. As far as the Quality of Immortality goes, I rank coporate immoratlity near the bottom

of the list.

What does someone have to do to effectively become an 'immortal'?

They have to change the way we view the world, collectively speaking.

Those who have done that throughout history, for good or ill, remain with us today. Bold Action is the Gateway to the Pantheon.

Corporations, which are nothing more than legal entities, may leave their mark on the world temporarily, but it's still the individual and their actions who are remembered.

Case in point: The name Henry Ford is big in the corporate world. But who started GM? Henry Ford is remembered for (again for good or ill) creating the modern assembly line, and an affordable vehicle. So it's not the corporation 'Ford' that is immortal, per se, but the man. And he has been immortalized (for the moment, at least) for his actions, not for the corporation in and of itself.

So I believe that as far as immortality goes, corporations are fleeting entities that will not endure the test of time as much as a Great Spirit who comes along and changes the way we view the world. Einstein, Gandhi, Jesus, Siddhartha, Genghis Khan: these men changed the world, and were immortalized for it.

Corporations have power in contemporary society because we've given them that power. But it's still Great Spirits who become immortals, in my opinion.

[Demeter]

62. Trust Me, The Corporations Don't Care About That Kind of Immortality

All they care about is $$$$$ and how much of $$$$$ they can extract, and the longer they live, the more they get.

And then, consider the Koch Brothers, who have taken the profits from their corporation (and it's totally private) to buy the government or at least a good chunk of it. And they have destroyed the GOP in the process.

The publicly owned corporations, like GM and GE and other would-be banksters, took that political "influence" and used it to get bailed out.

Power and profits--that's the Corporate game. Why would ordinary people care to honor THAT in their memories? And if you have the power and profits of a corporation, you can become famous for your "charity", like Bill and Melinda Gates (if that's what makes your day).

It is a totally different mindset, one I cannot get to function for me. I guess that's why street-walking never appealed to me either.

[ixion]

99. Oh, I agree with you completely. That's the irony, I guess.

In the Big Picture, they'll be quickly forgotten despite their delusions of immortality.

Bill Gates will probably be remembered as a minor footnote, once the Dark Age of Microsoft has passed. He contributed to the binary landscape the way Madonna contributed to music: largely by being an adept business person and exploiting the market.

I think a good comparison is too look at literature in it's Golden Age, from 1920 to the early '60s. Writers could make a decent living in a wide-variety of occupations, and many were household names at the time. Literally thousands of books made the best seller charts, and the vast majority of these authors (and their writings) are now long forgotten. The names that have emerged from that era, like Ernest Hemingway, rose to fame long after their work was done. Hem's books were largely panned until Old Man and the Sea won the Pulitzer in 1954, well after his prime and 30 years after The Sun Also Rises was released.

Hemingway is now in the Realm of the Immortals, having changed the landscape of American Literature. But you'd not have guessed that during his lifetime.

Another good example would be our namesakes, Demeter and Ixion. Talk about standing the test of time! Your namesake has fared better than mine, but they've both managed to keep their paragraphs in the encyclopedia. Let's see the CEO's pull that one off. :)

Okay, off to work in the garden now. Happy Sunday! :hi:

[Demeter]

61. Trichet: economy in deepest crisis since WWII

http://news.yahoo.com/s/ap/20100515/ap_on_bi_ge/eu_europe_financial_crisis

The President of the European Central Bank is quoted as saying that he still sees Europe's economy in its deepest crisis since World War II or even World War I...

ALL WITHOUT A SHOT BEING FIRED! AND INSTEAD OF DRAINING GERMANY TO PAY REPARATIONS TO THE VICTORS OF WWI, ALL OF EUROPE HAS BEEN DRAINED TO PAY THE BANKSTERS.

[Demeter]

63. Why The Way We're Working Isn't Working -- A Survival Manual for the Modern Age

http://www.alternet.org/vision/146880/why_the_way_we%27re_working_isn%27t_working_--_a_survival_manual_for_the_modern_age

...it's clear that something is wrong. It's not that our political leaders and economic chieftains aren't, for the most part, smart people -- it's that they're making their decisions without judgment or wisdom. And when so many smart people end up making so many mistakes, clearly the way we're working isn't working.

Figuring out why this is so -- and what we can do about it -- is the animating idea behind The Way We're Working Isn't Working: The Four Forgotten Needs That Energize Great Performance by Tony Schwartz, Jean Gomes, and Catherine McCarthy, a terrific new book. It is essential reading for anyone who wants a more productive and meaningful life.

...When you read The Way We're Working Isn't Working, you get that satisfying feeling you have when someone intelligently articulates something you feel everyone knows is true, but couldn't explain why. As Schwartz writes, "across disparate cultures and at all levels, people share both a visceral sense that the way they're working isn't working and an intense desire for more satisfying, productive, and sustainable ways to work and live."

In a nutshell, the book's thesis is that a myth has taken hold that "human beings operate most productively in the same one-dimensional way computers do: continuously, at high speeds, for long periods of time, running multiple programs at the same time." This has led to a world in which:

The defining ethic in the modern workplace is more, bigger, faster. More information than ever is available to us, and the speed of every transaction has increased exponentially, prompting a sense of permanent urgency and endless distraction... Left unmanaged and unregulated, these same technologies have the potential to overwhelm us. The relentless urgency that characterizes most corporate cultures undermines creativity, quality, engagement, thoughtful deliberation, and, ultimately, performance.

Thus, "when we fuel ourselves on a diet that lacks essential nutrients, it shouldn't be a surprise that we end up undernourished and unable to operate consistently at our best."

Yet, according to Schwartz, Gomes, and McCarthy, the most basic human survival need is to renew our energy. We're great at spending it, not so great at renewing it. The costs are "less capacity for focused attention, less time for any given task, and less opportunity to think reflectively and long term." The inevitable result: diminished judgment and wisdom -- and a world on the brink of collapse. "More and more," writes Schwartz, "paradoxically, leads to less and less."

SOUNDS LIKE "WHAT COLOR IS YOUR PARACHUTE?" BLENDED WITH A NEW-AGE DIET BOOK...

Schwartz has broken down the book into the four energy needs that he has identified as those we all require to live productive, meaningful, and happy lives. They are:

* Sustainability (the physical).


* Security (the emotional).


* Self-expression (the mental).


* Significance (the spiritual).

IF I GET A COPY AND READ IT, I'LL GIVE YOU AN INFORMED OPINION...

[Demeter]

64. What If BP Were A Human Being?

http://www.alternet.org/rights/146756/what_if_bp_were_a_human_being

If BP were a person it would be a career criminal, a pathological liar and an international serial killer with a rap sheet several times the size of the Chicago Yellow Pages.

The third largest oil company in the world, BP was born in 1909 as the Anglo-Persian Oil Company, and was partly owned by the British government. Its headquarters offices are in the UK, so if it were a flesh and blood person, it would be far and away the wealthiest person on earth, and a British subject. Assuming that our imaginary human BP got into the oil business at the youthful age of say, 20, and stayed at it for just over a century, BP the human being would be closing in on his 121st birthday. Damned few of us will see triple digits, and none of us that reach even our 60s and 70s retain the level of energy, or often of interest that we possessed only a couple decades before. A normal 120 year old human will have more than a few ailments and bodily systems on the brink of failure. But not our human BP. If BP were a person, it would be immensely, almost inconceivably wealthy AND perhaps immortal.

In the 1930s, the Anglo-Persian Oil Company became the Ango-Iranian Oil Company. In the 1970s it swallowed Standard Oil of Ohio, in the 1980s it merged with Amoco, formerly Standard Oil of Indiana, and in the 21st century it bought Arco and other oil companies. Along the way, BP has utilized all these and other brands, like Conoco, at its convenience. Most recently, BO the corporation has rebranded itself, declaing that BP now stood for "Beyond Petroleum."

Among flesh and blood humans, there are no precise analogs to what corporations do when they buy and sell each other. The acts of matrimony and cannibalism perhaps comes closest, with consenting or non-consenting spouses and/or victims, along with assumption of the spouse and/or victim's assets. Among humans, marriage is a reason to change one's name too. Another reason to change one's name is simply to escape one's old record and reputation. Among humans, that's called assuming an alias. So our immortal, immensely wealthy human BP may have been married several times, perhaps several times at once, could be a cannibal, albeit with sometimes willing victims, and operates under several aliases.

You don't have to look too long and hard to understand why a flesh and blood BP would need aliases. The objective of the Anglo-Persian Oil Company was to monopolize the rich oil resources of what is now Iran. Among the many illegal acts it committed toward that end was a £5,000 bribe to future British PM Winston Churchill back in 1923 to lobby for its interests A secular nationalist and democratically elected Iranian government kicked BP out in the early 1950s. BP turned its lobbying to Washington DC, and in 1953, helped persuade the U.S. to overthrow the Democratic Iranian government and installed its puppet, the Shah, popularly known as the Crowned Cannibal. The Shah, in the course of killing millions and stealing billions, invited BP back, and it stayed until 1979, when the Shah was overthrown.

In a century of doing business, BP has been implicated in bribery of public officials, grand theft, fomenting unjust wars, of murder, torture, plunder, environmental destruction, and money laundering in and between scores of countries on every continent except Antarctica. If BP were a person it would be a career criminal, a pathological liar and an international serial killer with a rap sheet several times the size of the Chicago Yellow Pages.

Given his (we're reasonably sure a human BP would not be a woman) global reach and proclivity to corrupt public officials around the world, and past record, BP the human being would be a flight risk. It would be indicted for murder, or at least negligent homicide in the deaths of the last eleven oil workers to die when its rig exploded in the Gulf of Mexico. U.S. law doesn't have death penalties for corporations, but the federal government, and most or all of the first wave of Gulf Coast states where the oil slick wil wash up do. We're talking Florida, Alabama, Mississippi, Louisiana and Texas.

The assets of corporations are protected against lawsuits of all kinds. BP and other oil industry giants long ago paid for the insertion of provisions into the U.S. federal code that limit their liability in the case of oil spills to a mere $75 million dollars. But there are no limits on the liability that individually held wealth can occur. A human BP, even though 120 years old and immensely wealthy, could see all his assets around the world frozen, would be imprisoned without bail, and might be on trial for his life.

But of course the real BP is a corporation, and death penalties, like laws in general are for humans, not corporations.

In the single instance of the blown rig at Deepwater Horizon, BP had a deal with the U.S. federal government that excused it from paying any royalties, and subcontracted the building and operation of the rig to Halliburton, Cameron and other corporations. If they too were human beings like our hypothetical human BP, we could add "conspiracy to commit" and "conspiracy to conceal" in front of all the previously mentioned offenses, and the lot of them along with many of their favorite government officials could be rounded up.

When it suits their purposes, employees and mouthpieces of various transnational firms hasten to assure us that "corporations are people too." In a sense this is certainly true. Despite what some bible thumping fundamentalists will tell you, corporations were not ordained by the Almighty. Corporations are legal fictions. They are artificial shields under which we agree to allow a handful of extremely wealthy people to rule over the rest us, and plunder the planet and its people at will, just as centuries ago most of the humans who mattered agreed that kings, queens and nobly born, the "people of quality" had the god given right to ride roughshod over humanity.

Ultimately, people woke up, rose up, and revoked those privileges. How long will it be before we revoke the lawless privileges of corporations, before we limit their immunity, curtail their immortality, and rein in their immorality?. How long can we, and the planet on which we depend for life itself, wait? Is there every a line that cannot be crossed? Where is it? What will it take?

[snot]

73. I'd really like to see some close, factual research & analysis on

whether, how, and to what extent the shield from personal liability afforded by corporate entities is really necessary or desirable from a cost/benefit p.o.v.

I mean, the whole point was that we needed to afford some kind of liability shield to individual entrepreneurs in order to encourage them to undertake enterprises that might be beneficial to society but that could otherwise involve considerable risk to the individuals.

But I've never seen any study exploring the actual facts as to whether and to what extent this shield is really necessary. Would entrepreneurs completely refrain from certain activities without the corporate shield? Are the enterprises undertaken with it really so beneficial? Could the risks not be addressed through some kind of insurance pool or other means instead? Should society continue to leave it entirely up to the individuals involved to decide whether the risks and rewards of the proposed enterprise warrant such a shield? Etc.

[Demeter]

75. There Is the Concept Called "Piercing the Corporate Veil"

Piercing the corporate veil describes a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. Common law countries usually uphold this principle of separate personhood, but in exceptional situations may "pierce" or "lift" the corporate veil. A simple example would be where a businessman has left his job as a director and has signed a contract to not compete with the company he has just left for a period of time. If he set up a company which competed with his former company, technically it would be the company and not the person competing. But it is likely a court would say that the new company was just a "sham", a "fraud" or some other phrase,<1> and would still allow the old company to sue the man for breach of contract. A court would look beyond the "legal fiction" to the reality of the situation.

Piercing the corporate veil is not the only means by which a director or officer of a corporation can be held liable for the actions of the corporation. Liability can be established through conventional theories of contract, agency, or tort law. For example, in situations where a director or officer acting on behalf of a corporation personally commits a tort, he and the corporation are jointly liable and it is unnecessary to discuss the issue of piercing the corporate veil. The doctrine is often used in cases where liability is found, but the corporation is insolvent...

http://www.google.com/search?q=piercing+the+corporate+veil&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a


*

One of the biggest advantages to incorporating a business is that the principals of the corporation enjoy broad protection from being held personally responsible for the debts and liabilities of the corporation. That is, creditors can reach the corporation's assets, but once those assets are exhausted they cannot ordinarily also reach the personal assets of the owners or shareholders of the corporation. Under some circumstances, those to whom the corporation is liable will attempt to "pierce the corporate veil", the legal term used to describe an action to have the corporation set aside for purposes of the litigation such that personal liability attaches, and personal assets can be reached.

This ordinarily happens in civil litigation, where the corporation is believed to have inadequate assets to cover its liabilities, and the plaintiff alleges that the corporation is actually a sham - that is, the corporation is not really a distinct individual, but is merely an extension or "alter ego" of its shareholders, being used to advance their private interests or to perpetrate a fraud.

As the precise facts and circumstances which can result in a piercing of the corporate veil will vary depending upon state law, and as this is a fact-dependent inquiry, it is important to consult with a qualified lawyer when evaluating whether the corporate veil may be pierced in any specific case...

http://www.expertlaw.com/library/business/corporate_veil.html

Piercing the Corporate Veil - Most people incorporate primarily for liability protection. When you form a corporation, limited liability company, or similar business entity, a “corporate veil” is created between your personal assets and your business. When properly managed, corporate veils provide significant personal liability protection against lawsuits, creditors, and other disputes. Without the protection of a strong corporate veil, the risks of doing business can be prohibitive.
However, to prevent Piercing the Corporate Veil you must do more than merely form a business entity and register it with the state. There are a host of ongoing governance requirements and formalities for business owners. If challenged in a lawsuit, IRS audit, or other action, you must be able to prove that you have a bona fide business entity. You will be challenged to show that you have a real business, not just a sham created to dodge personal liability. Protecting business owners by helping them keep the rules of corporate governance. This is to prevent "Piecing the Corporate Veil".

Piercing the Corporate Veil - Officers, directors and controlling shareholders have a general fiduciary duty of loyalty and care which should govern all their corporate conduct. Unless they breach that duty by gross negligence or acts in bad faith, they usually will have no personal liability to third parties.

Third parties have to show personal wrongful conduct on the part of a company official or director to hold them personally responsible, extra-corporate actions which would support application of the legal doctrine known as "Piercing the Corporate Veil."

Under Piercing the Corporate Veil, the corporate form is used to perpetuate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts may decide not observe the separation of the corporate entity from its stockholders, and it may deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation...

http://www.residual-rewards.com/piercingthecorporateveil.html

AND I THINK THAT IS WHERE WE OUGHT TO BE HEADING

[snot]

88. I'm familiar with it; in practice, that piercing is extremely difficult to achieve.

But apart from that, what I'd like to see is a re-evaluation of the whole system. I mean, somewhere along the line, without any research, we were persuaded to grant this shield and make it relatively difficult to pierce. Why can't we do some research, statistical analyses, etc. -- better late than never -- to try to shed some light on whether this approach is, on the whole, serving society well. Are we in fact getting valuable innovations, etc. out of it that we wouldn't get otherwise? And at what cost?

Maybe we'll conclude we should go back to holding officers and directors personally liable for the damages resulting from their decisions. Or maybe we should levy a greater franchise tax for the privilege of the corporate shield, to be used as a sort of insurance fund out of which to pay damages from which officers and directors are shielded -- maybe even peg the tax/ins. premium to losses (e.g., if BP doesn't promptly pay for all the losses it causes, the franchise tax/premiums on ALL corps. could be raised, just as United Healthcare passes its increased costs on to its insureds). Or at least tweak the standards and other aspects of the system.

[Demeter]

98. We Should Put Crooks Out of Business

The frauds go on unchecked by any regulation or punishment.

[Hugin]

102. "What need we fear who knows it, when none can call our power to account?"

"Yet who would have thought the old man to have had so much blood in him?" -- Lady M.


Don't mind me... I simply HAD to drag this down here.

[Demeter]

65. Katha Pollitt: What Ever Happened to Welfare Mothers?

http://www.thenation.com/article/what-ever-happened-welfare-mothers

Long lines of gloomy people in business suits at a jobs fair. Foreclosure signs on tidy suburban lawns. Adults moving into their parents' basement. In the news these days, the face of poverty is middle class, educated and often married: the hard-working, play-by-the-rules victims of the ongoing financial crisis. It's the man-bites-dog story that never ends.

But what about the people who already were poor before the crisis? Like women on welfare? Oh, them. The welfare reform bill, pompously titled the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and signed by Bill Clinton in the run-up to the election, was supposed to pull these hapless folk off the dole with a mix of carrots and sticks aimed at forcing mothers off welfare and into the workforce. Not only would they find jobs that would allow them to support their children, the theory went; once single motherhood ceased to be subsidized by the taxpayer, poor women would settle down and marry before having kids. On its tenth anniversary PRWORA was widely trumpeted as a success: "Pragmatic progress," declared Newsweek's Robert Samuelson. "Everything has worked," Douglas Besharov of the American Enterprise Institute told USA Today. "Welfare reform has been a triumph for the federal government and the states—and even more for single mothers," claimed Brookings Institution senior fellow Ron Haskins in its newsletter. On the New York Times op-ed page, Clinton patted himself on the back for a successful triangulation ("At the time, I was widely criticized by liberals who thought the work requirements too harsh and conservatives who thought the work incentives too generous") and for moving millions from "dependence to empowerment."

True, the widespread disaster—1.1 million newly poor children, for instance—predicted by some opponents did not come about: child poverty actually went down. Millions of welfare mothers found work, albeit often casual, low-wage jobs that did not lift them out of poverty. How much of a triumph is it that in the late 1990s, 65 percent of former recipients in South Carolina were working, earning an average hourly wage of $6? Or that in Maryland, in one quarter, about half of former recipients had found work at pay that annualized to roughly $9,500—way below the poverty line for an average family? In a New York City study I wrote about in February 1999, only 126 former recipients out of a sample of 569 even had valid phone numbers, hardly a sign of prosperity and stability; of the 126, 58 percent were supporting their families "mainly through work," and the median wage was $7.50.

But those women were entering the workforce at a moment of labor-force expansion and prosperity in the US economy; 16 million jobs were created in the 1990s. And even then—with a good jobs market, well-funded transitional programs and federal and state coffers flush with tax dollars—most welfare mothers stayed poor. Some, indeed, became poorer than ever, a development that tended to be briefly noted, if at all. As for the effects PRWORA was supposed to have on sexual mores, teen pregnancy did go down—but that happened for many reasons, and the United States is still way out in front of the other industrialized nations, including those with generous supports for young mothers and their children. Single motherhood continued to rise, accounting for 41 percent of all births in 2008, a historic high. Since single motherhood is rising all over the world, in countries from Ireland to Japan, it is not surprising that it has proved resistant to PRWORA's supposed miracle cure.

If the boom years failed to lift poor mothers into the middle class, how are they faring now that the middle class is becoming the new poor? The fact that the welfare rolls have risen less than 10 percent since December 2007 while food stamp use has soared by 40 percent—an amazing one in eight Americans now uses them—suggests that welfare isn't reaching poor families: either women who apply are being turned away, or the programs are so minimal, or so onerous, that people aren't signing up. How do they manage? Sharon Hays, author of Flat Broke With Children: Women in the Age of Welfare Reform, writes in an e-mail, "They get by in the same way the poor of New Orleans and Haiti are getting by, by cobbling together every available source of aid and support, and then trying to learn how to adjust to constant suffering and insecurity. Increasing rates of domestic violence are just one hidden story here." And what about women who have reached their state's time limit—two years, three years, five years—and can't get welfare for the rest of their lives? Jane Collins, the author, with Victoria Mayer, of Both Hands Tied: Welfare Reform and the Race to the Bottom of the Low-Wage Labor Market, writes, "In Wisconsin, most people who have used up their time limits are simply out of luck."

Sounds like the laid-off workers for whom Congress recently capped unemployment benefits at ninety-nine weeks—but their situation, unlike that of welfare mothers, evokes widespread sympathy. No one sane assumes that today's unemployed are loafing, that jobs are "out there" for them or that getting married would solve their problems. If you think about it, though, given that PRWORA has been in effect for nearly fifteen years, it would not be difficult for a mother to reach the lifetime limit, even in Wisconsin, where it's a comparatively generous sixty months.

I asked Collins if she saw anything good in welfare reform. "It was always a stigmatized program, a football in racial politics. If it were possible to make unemployment and other entitlement programs gender sensitive—to take account of caregiving, for example, and the need for childcare—and put women into these mainstream programs instead of welfare, that would reconceive poor mothers as economic citizens, as workers with rights. And that would be good." But for that to happen, people would have to care.

[Demeter]

71. Weak Bond Covenants Entice ‘Myopic’ Investors, Moody’s Says

http://www.businessweek.com/news/2010-05-12/weak-bond-covenants-entice-myopic-investors-moody-s-says.html

Companies are selling junk bonds with the weakest creditor protections since 2007 to investors betting a recovering U.S. economy will help extend a rally in speculative-grade debt that began last year, Moody’s Investors Service said.

Standard Pacific Corp., CF Industries Inc. and AK Steel Corp. issued debt in April on terms historically available only to higher-rated companies, Moody’s analysts led by Alex Dill in New York wrote in a report today.

Safeguards for bondholders, known as covenants, are weakening amid record issuance of high-yield, high-risk debt as “myopic” investors bet issuers won’t struggle to manage their obligations, the analysts wrote. Lenient terms such as those to which investors are now agreeing may allow companies to borrow too much and later force creditors to accept losses in a debt exchange or bankruptcy, according to the analysts.

“This trend represents more than an episode of ‘back to the future,’” the analysts wrote. “It reflects a weakening in covenant protections even below those existing at the peak of the market, in 2006 and 2007.”

Junk bonds are rated below Baa3 by Moody’s and BBB- by Standard & Poor’s.

High-yield debt issuance of $106.1 billion this year is on pace to exceed a record $162.7 billion in 2009, according to data compiled by Bloomberg. Junk bonds returned 66 percent from March 2009 through last month, Bank of America Merrill Lynch Index data show.

Yields on speculative-grade bonds fell to 8.23 percent on April 27, the lowest since July 2007, the index data show. They have climbed as the debt declined 2.4 percent this month amid investor concerns that Greece and other European nations will default.

“One can make a strong argument that the market is myopic regarding medium- to long-term risk of declining bond value,” the analysts wrote. “Losses can occur from high leverage that loose covenants enable during good times, which, in a different economic environment, can no longer be sustained.”

[snot]

89. Do buyers not care 'cuz they're also buying derivatives against the junk?

[Demeter]

76. POSTING THIS THREAD IS LIKE TEACHING AN EVENING COURSE IN COLLEGE

It leaves me overwhelmed by the amount of information, the limited time, the desperate timeframes we live in, and the inattention or complete absence of most of the class of people that needs this info. And the inability of other needy people to even access, let alone understand it.

I appreciate every reader more than I can tell you. I hope you are doing what you can to spread this information around. What we do may seem pointless. Some may quibble about copyrights. But this is a matter of life and death for people and the nation and even the world.

It matters. It matters a lot. We must learn, teach, and use this information while we can still get at it.

[DemReadingDU]

80. Thank you Demeter

Appreciate all your efforts, I learn a lot.

[hamerfan]

83. Seconded!

Thank you, Demeter.
For all the time and effort you put into WEE for us.
:yourock:
hamerfan

[snot]

90. Thirded!

[Karenina]

94. Fifthed!

:loveya:

[ixion]

101. Sixthed!

Great weekend post. :woohoo:

[Hugin]

104. Seventhed!!1!

Or perhaps, 6 and a 1/2-ed!

Depending on how it's counted.

[Dr.Phool]

91. Fourthed!!!!

I'm amazed at your sheer energy and determination. And it's all appreciated.

We love ya, and all that you do.

Thank you!

:hug: :grouphug: :hug: :grouphug: :hug: :grouphug: :hug: :grouphug: :hug: :grouphug: :hug: :grouphug:

[ozymandius]

105. Hear! Hear!

Indeed this is a most invigorating thread, underlying its importance. You pack into here as much information over the weekend as a week's worth of SMW threads. :yourock:

[bread_and_roses]

106. Tenth, or whateveer - I am grateful - and musings on the Toba event

and sorry I can't absorb it all, and sorry I don't contribute more. I have little energy for it these days- have fallen prey to "hopelessness" - someone said that courage is going on when hope is lost, or something like that - I know I'll get back to slogging along; just have to wait out the intermittent despair phase...seems like every week I think "this is the last straw" - but this week, with the Gulf, it really does feel like that.

I find myself musing a lot on the Toba event, these days. I wonder, if there really was a genetic "bottleneck" due to a horrendous human population crash after the Toba eruption, could it be that those who survived were the most ruthless, the least empathetic, those willing to do anything - kill, cannibalize, anything - to live. Did catastrophe select for essentially psychopathic traits?

Or is consciousness itself - conferring, as it does, awareness of death - an evolutionary aberration, one that living organisms simply cannot bear? Is that why infants - so innately joyous and loving - grow up to be adults who can inflict the most appalling tortures on each other? Are we simply all driven mad by consciousness itself, and literally trying to kill ourselves to end the pain?

[Demeter]

107. I Read the Wiki Article--Fascinating!

Well, we may be experiencing the financial equivalent. Let's hope some good comes of it.

[Hugin]

108. If you think of it as Dancing in the Afterglow... It helps, somewhat.

That's where I've been for the past few weeks. :/


Honestly, with this talk of Nuking the Whole... I'm beginning to see Einstein's point about not calling on the people who created the problem to solve the problem.

Taking a bunch of people who thought they could fool (and out litigate) mother nature and asking them to clean up a mess their corner-cutting lying conniving greedy bastard ways brought about... Is wrong.

Have them call me when they start thinking along more conventional lines... Starting with dealing with having anything able to survive the 40,000 psi at 5000 ft depth long enough to be of any use and dense enough to stay there for any amount of time without floating off like a Styrofoam cup.

[DemReadingDU]

111. Toba event

I'm not sure I remember hearing about this before, interesting reading
http://en.wikipedia.org/wiki/Toba_catastrophe_theory

I wish I could be more like the rest of my family...working on the latest remodeling project, planning another vacation, buying the newest electronic gadgets, trinkets and clothes. I don't care anymore about those things. They are so irrelevant for what we will soon be facing when the global financial Ponzi implodes. I think 99% of people are clueless, they think I 'cry wolf'.

[DemReadingDU]

77. The Coming Financial Tsunami

This is a re-post of an article written via Gordon Gekko's blog...

In light of what’s happening right now (and the fact that I never posted it on ZH before), I thought it relevant to post this article that I wrote in the February of 2009 as a primer for friends and family to help them become aware of what was happening (and prepare for what I saw coming). Remember – this was written for people who were very much enmeshed in the MSM propaganda world and had no clue of the reality behind our economic, financial and monetary system. The idea was to gently introduce them to the truth and give a brief overview, so you won’t find me going into the full technical and gory details; plus I wanted to keep the length manageable so as to not put them to sleep. If you find it worthwhile, feel free to forward it to your near and dear ones who are still entrapped in The Matrix.

click link for graphs and charts
http://www.zerohedge.com/article/coming-financial-tsunami

direct link...
http://gordongekkosblog.blogspot.com/2010/05/coming-financial-tsunami-redux.html

[Demeter]

78. Two Americas By Cindy Sheehan

http://www.informationclearinghouse.info/article25446.htm

As I sit here at a Socialism conference in Seattle, I am reminded of a recent humiliating experience that I went through.

To make a long story short—this past February, I received a letter from the DA’s office of my county. For the first time ever, I was informed that I “knowingly” passed a “worthless check” and if I didn’t immediately send a money order to pay for the check, the store fee AND $130 to pay for a “bad check writer’s class,” that I would be prosecuted for a FELONY!

I immediately did send a money order and a letter saying that I felt that be threatened for a felony for something that I didn’t know happened, and for a first offense was a little over the top.

So, instead of taking a Saturday out of my life to take the naughty check writer’s class, I had to pay $35 to take the audio course that comes with a “text” book and a workbook.

This audio program was completely humiliating and degrading. I was told that writing a bad check was comparable to dealing drugs, because I “knowingly” stole from the merchant and there is NO excuse for passing a “bad check.” And to get my finances under control I should shop at thrift stores and not grocery shop when I am hungry, etc.

One of the “tips” that I was told, also, was that I should never buy my son “designer sneakers” because he can do with shoes from a discount store or a thrift store. Of course we want to be able to tell the rich kids from the poor kids.

I was instructed on how to balance a checkbook and to make a budget. The more I listened to this program, the angrier I became because it just reinforced to me the intense class divide that we have in this nation/world.

If you are in what I call the “Robbed Class,” on one hand, we are force fed a daily dose of Madison Avenue propaganda and we are made to feel less than human if we don’t have brand new and brand name consumer goods.

Also, even though the Robber Class mortgage companies and banks enticed and deceived millions of people into their “high risk” low-interest (adjustable) mortgages that were then chopped up into a million pieces in Mortgage Backed Derivatives—and of course people were able to be led like sheep to slaughter for these loans because we are also mythologized of the “American Dream” of home ownership as the pinnacle of American existence.

Even discounting that our currency is mostly based on magical thinking/credit—the Robbed Class lives on credit and bases prosperity on hardware that is visible but purchased on credit that is invisible. So, the Robbed Class gets in a virtual cycle of debt slavery to try and keep pace with the American Dream. We work (if we are lucky enough to have a job) real hours to make phony money to pay off our credit obligations to pay for real goods. However, I am convinced that many people are now using credit to buy essentials such as gas and food, not luxuries.

What happens when the credit dries up, like it has? How do we in the Robbed Classes feed our families and purchase gas to get to work? Many people go into further debt by using these check cashing facilities. I recently saw a commercial for a “signature loan” from one of these places—it’s a great deal—you can borrow $2500 and pay only 139% interest! Some people are so desperate that they will unfortunately go for it.

So, I finished my bad check writer’s course, and in my evaluation, I said that there are worse things than writing a bad check: war and economic exploitation being only two of those things.

I want to share my recent exercise in humiliation to make a point. There ARE Two Americas that John Edwards (former Senator, VP Candidate) knows nothing about.

There’s the America that I belong to. The one where mothers often have to miss work or send their children to school or day care ill, because they CANNOT AFFORD to miss work. There’s the America where some families and especially seniors have to choose between buying medicine and buying food.

However, the America that I belong to also buys into the Myth that we don’t deserve to have healthy food, education, health care, a warm and non-leaking roof over our heads, without living as debt slaves, because we don’t belong in the privileged “elite” class.

My America sends our children off to fight and die and kill innocent people in wars that the other America profits off of.

We need a Robbed Class revolution, but before we can have one of those—our class needs to come to the conclusion that there is something deeply wrong with this U.S. system of out-of-control crony Capitalism.

This Capitalism not only leads to war, but economic and environmental devastation. The gusher in the Gulf of Mexico is happening because of back-room deals between the companies involved and the U.S. representatives that are purchased by oil companies.

Capitalism has brought this world to the brink of disaster, now it’s up to the people to bring it back.

[DemReadingDU]

79. Unhinged: When Concrete Reality No Longer Matters to the Market (and What to Do About It)

5/15/10 Unhinged: When Concrete Reality No Longer Matters to the Market (and What to Do About It)
by Zeus Yiamouyiannis, Ph.D.

Introduction

Something profound has happened, obscured by all the concerns about economic details and speculation about whether we are in a “deep recession” or a “depression,” a “nascent recovery” or a “W shaped” downturn. We no longer have a global economic system that is tethered to concrete reality. Parasitic, amoral, slight-of-hand value-shuffling (what I would call the “unreal economy”) has effectively trumped the “real economy,” the production and exchange of meaningful goods and services.

Worse, we’ve let it happen with our acquiescence, our hope that we can just ride this one out, and our denial of what we sense intuitively to be true—pervasive fraud in the conduct of global financial business and massive counterfeiting in the establishment of value.

We’ve allowed big banks and affiliated institutions to simply concoct fake wealth out of thin air, and we have legitimized and rewarded these concoctions with a massive transfer of real wealth to a very small but powerful oligarchy through unregulated private bets backed by public taxpayer money, stratospheric fees siphoned from transactions, predatory lending, and private equity cannibalization of once-productive firms.

A global economy mediated by an acceptance of a standardized, reality-based rule of law and value between nations has given way to the shrouded anarchy of transnational banks as overriding powers driven by their own brand of anti-public “interest.”

What constitutes value has migrated from actual value, based in something you earn and related to something you can actually concretely use, to “references to value,” some number merely assigned to some financial instrument attached to some good or service somewhere several degrees removed from its source. (Think “mortgage backed securities” where the actual deeds to properties are no longer even in the picture after extensive “packaging” and repackaging.)

This is all a fancy way of playing the age old game, externalize liabilities, internalize gains, but on an unprecedented and potentially cataclysmic scale. Just as with political coverage that largely deals with the “horse race,” personalities, gaffes, and likeability of candidates over actual policy, financial coverage has concerned itself with a relentless boosterism, tea leaf reading, and a host of other trivialities while the structural rot goes unreported.

Abstractions like the “velocity of money,” along with whitewashing indicators like trading volume are used to gauge the health of an economy without sorting out whether such indicators are attached to some productive, underlying activity or asset. This all serves to create a convenient smoke screen for moneyed interests, and progressively makes the “new normal” one that thrusts citizens deeper into debt servitude.

Post Mortem and Review

A post mortem is in order. The elements of this worldwide con game are remarkably simple, not complex at all. Apparently you only need a few things to make a mockery of the entire global economic system, and big banks garnered these few important things through “regulatory capture”:
1) Unregulated, unenforced rules (particularly for derivatives)
2) license to “mark to model” (assign your own values to your assets)
3) ability to peg present value to irrational expected future returns (based on unlimited, exponential growth)
4) infinite leverage (no effective requirements for reserve capital in unregulated “shadow” markets)
5) massive size, so that the bank is "too big to fail"
6) non-transparency and non-accountability.

This combined with the moral, social, personal, and cultural approval of maximizing profit at any cost, incentivizes massive fraud and counterfeiting. How could this be otherwise, given the premises?

So here we have a system where you can 1) make up your own rules, 2) establish any value for any asset you choose, 3) inflate that value a hundred fold based on ostensible future value and returns, 4) leverage that inflated value another thousand or a million fold simply on your say-so, enough to buy up multi-billion dollar firms if you choose, 5) lean on taxpayer bailouts when you get into trouble, and 6) do this without any disclosure or accountability, all based upon a self-interested formula you concoct to enrich yourself. This is less sin or malfeasance than just plain lunacy. Yet, this is what we have and what we have allowed to gain the upper hand.

Literally, following the same formula with a little “solid reputation” sprinkled on, I can value my cat’s litter box at a million dollars, trade on its ostensible increased future value to skim myself a tidy sum in profit and transaction fees, leverage my “marked to model” value of that litter box, a million fold to buy up Chrysler. I can then loot Chrysler, stripping it of its real wealth and infrastructure, gut jobs, etc. for short term boosts to profits, and then walk away a billionaire.

I can give any reason or no reason at all for what I’m doing. I don’t have to tell anyone a thing, and no one is going to come after me. If they do “come after me” it will be to lard me with hundreds of billions of dollars of taxpayer money to keep the national or global economy from collapsing.

Talk about throwing good money after bad. The most I can lose is my litter box and now that everyone has a stake in the con, they have every incentive to cover it up and make me whole, both to protect against their anxiety and their feelings they’ve been conned, and to maintain a functioning dysfunctional system.

lots more...
http://www.oftwominds.com/blogmay10/market-unhinged-from-reality05-10.html

copyright 2010 Zeus Yiamouyiannis. Permission to link to this essay is hereby granted to anyone who includes the author's name, copyright and the URL to this site.

[DemReadingDU]

81. NPR: Prohibition Life: Politics, Loopholes And Bathtub Gin

5/10/10 Prohibition Life: Politics, Loopholes And Bathtub Gin

Between the years of 1920, when the 18th Amendment to the Constitution was passed, and 1933, when the 21st Amendment repealed the restriction, it was illegal to sell, transport or manufacture "intoxicating" beverages for consumption in the United States.

But Prohibition didn't stop drinking; it simply pushed the consumption of booze underground. By 1925, there were thousands of speakeasy clubs operating out of New York City, and bootlegging operations sprang up around the country to supply thirsty citizens with alcoholic drinks.

In his new book, Last Call: The Rise and Fall of Prohibition, Daniel Okrent explores how a confluence of political and social trends led to America's dry era. Okrent explains how both the suffrage and anti-immigration movements helped in the shaping and passage of the 18th Amendment and how Prohibition served as a stand-in for several other political issues.

"Prohibition became the same sort of political football that people on either side would use trying to struggle to get it towards their goal, which was control of the country," Okrent tells Terry Gross. "You could find a number of ways that people could come into whatever issue they wanted to use and use Prohibition as their tool."
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Prohibition was a tool that the white South could use to keep down the black population. In fact, they used Prohibition to keep liquor away from black people but not from white people. So you could find a number of ways that people could come into whatever issue they wanted to use and use Prohibition as their tool. The clearest one, probably, was women's suffrage. Oddly, the suffrage movement and the Prohibition movement were almost one and the same — and you found organizations like the Ku Klux Klan supporting women's suffrage because they believed women would vote on behalf of Prohibition."
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.On the connection between the suffrage movement and the temperance movement

"It largely had to do with the fact that in the 19th century, women had no political rights or property rights. So as the saloon culture began to grow up and we would see men going off to the saloon and getting drunk ... Susan B. Anthony, in the late 1840s, makes her first attempt to make a speech in public life at a temperance convention. This was before she connected with the suffragist movement. She rose to speak at a meeting of the Sons of Temperance in New York, and they said, 'You can't speak. You don't have the rights. Women aren't allowed to speak here.' And that's what pushed her into the suffragist movement. So in fact, you could say that the birth of the suffragist movement comes with the wish to get rid of alcohol."
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Lots more, click link to hear interview
http://www.npr.org/templates/story/story.php?storyId=126613316

[Demeter]

84. "Thumbs Down" on the EU Bailout By Mike Whitney

http://www.informationclearinghouse.info/article25450.htm

Barack Obama must have been very frightened, indeed. Otherwise he never would have inserted himself so forcefully into Greece's debt crisis. The truth is, there's much more at stake then people seem to realize. A Greek default would be a major blow to the banking system and the damage would not be limited just to Europe. It could easily spread to the United States and trigger another meltdown. That's why Obama spent most of his weekend on the phone, exhorting EU finance ministers to take swift action to put out the brushfire.(AND WE ALL KNOW WHO WAS NAGGING HIM TO DO SO--ALL THE BOYS FROM GOLDMAN AND GOOD OLE UNCLE BEN!) Not surprisingly, the details were omitted in the US. media. Here's an excerpt from the UK Independent explaining what happened behind the scenes last weekend:

"As the dust settles and the markets cool, details are beginning to emerge of the frantic background negotiations which generated the €750bn plan to save the euro in the early hours of Monday.....the most startling – and most pivotal role – may have been played by Barack Obama, according to both American and French officials. He convinced the Europeans that it was time not just to Do Something, but to Do Something Very Big, to rescue the euro and prevent the world from plunging into another financial crisis and recession.....

It was after these calls that the headline figure for the EU rescue plan inflated rapidly to €500bn, plus another €250bn from the IMF." ("Was the euro saved by a call from Barack Obama?", John Lichfield, Independent)

The Telegraph's Ambrose Evans-Pritchard tells a similar tale, but with a twist. In this incident, Obama spoke directly to Spanish Premier Jose Luis Zapatero. Here's an excerpt from the Telegraph:

"Premier Jose Luis Zapatero told a stunned nation that public sector pay will be reduced by 5 percent this year and frozen in 2011...Pension rises will be shelved. The country’s €2,500 baby bonus will be canceled. Aid to the regions will be slashed and infrastructure projects will be put on ice....

US President Barack Obama played a key role behind the scenes, pleading with Mr Zapatero for "resolute action". The telephone call from the White House is a clear indication that contagion from Greece and Portugal to the much larger debt markets of Spain had become a global systemic threat by late last week.

"The markets were going in for the kill: the eurozone itself was on the brink of collapse," said Jose Garcia Zarate from 4Cast." ("EU imposes wage cuts on Spanish 'Protectorate", Ambrose Evans-Pritchard, Telegraph)

Is that why Obama was twisting arms all Saturday and Sunday, because he thought the EU might collapse? Does that explain why the Federal Reserve reopened its controversial swap lines with European central banks, providing unlimited short-term loans in dollars for collateral to prop up the euro and exposing the US to tens of billions in potential losses without congressional approval? And is that why ECB chief Jean Claude Trichet reversed his position on monetization and agreed to initiate an EU quantitative easing (QE) program to would buy up government and corporate bonds?

What's clear, is that very little of last weekend's behind-the-scenes maneuvering had anything to do with the problems facing ordinary Greeks, who are merely the victims in this latest bank bailout fiasco.

Greece will not escape default, so it's not in its long-term interests to stick with the euro. That just ensures years of high unemployment, severe cuts to public spending, and neverending recession. A return to the drachma would provide an opportunity to restructure debt and regain fiscal equilibrium via devaluation. It would give Greek exports and tourism a boost by making them instantly cheaper. Economist Mark Weisbrot explains the shortcomings of the EU strategy in an op-ed in the New York Times. He says:

"The problem is one of irrational economic policy. The Greek government has reached an agreement with the E.U..... and the I.M.F. that will make the current economic problems even worse....

The projections show that if their program “works,” Greece’s debt will rise from 115 percent of gross domestic product today to 149 percent in 2013. This means that in less than three years, and most likely sooner, Greece will be facing the same crisis that it faces today......The Greek people will go through a lot of suffering, their economy will shrink and their debt burden will grow, and then they will very likely face the same choice of debt rescheduling, restructuring, or default — and/or leaving the Euro." ("The EU's Dangerous Game", Mark Weisbrot, New York Times)

No country large or small has managed to close a fiscal gap as large as 10.9% of GDP. (which is what Greece is being asked to do) It's cruel, especially in an environment where deflation is gradually tightening its grip. Greece needs counter-cyclical fiscal stimulus to get out of the hole its in and to grow its way out of recession. The EU plan implements an anti-Keynesian regimen that is the exact opposite of Obama's American Recovery and Reinvestment Act (ARRA) the $787 billion fiscal stimulus package to build aggregate demand and lower unemployment. The EU has no funding mechanism to implement such a plan, so it is prescribing extreme austerity measures instead. It's unrealistic and it won't work.

Greece didn't create this crisis by itself anyway. It had help from Germany. Germany dictates monetary policy in the EU, which means that it bears much of the responsibility for the deficit-mess in the south. Of course, now that the countries that enriched Berlin (by gobbling up their exports) are flailing about in red ink, German politicians have started lecturing them about the evils of profligate spending. Here's how Michael Pettis sums it up:

"The strong euro and burgeoning liquidity it brought on meant that much of Germany’s trade surplus had to be absorbed within the eurozone, forcing especially southern Europe into high trade deficits. These deficits were dismissed, very foolishly it turns out, and against all historical precedents, as being easily managed as long as the sanctity of the euro was maintained.....

As I see it, domestic German policies, perhaps aimed at absorbing East German unemployment, forced a structural trade surplus. The strong euro, along with the automatic recycling of Germany’s large trade surplus within Europe, ensured the corresponding trade deficits in the rest of Europe – unless Europeans were willing to enact policies that raised unemployment in order to counter the deficits. As long as the ECB refused to raise interest rates, southern Europe had to accept asset bubbles and rapidly rising debt-fueled consumption.

This couldn’t go on forever, or even for very long. Now southern Europe is paying the inevitable price, and of course the moralists are accusing the south of being shiftless and lazy, confusing the automatic balancing mechanisms in the balance of payments with moral weakness." ("Are you ready for the united States of Germany?", Michael Pettis, China Financial Markets)

Only a small portion of the nearly-$1 trillion bailout will go to Greece. And, even that pittance comes with strict "belt-tightening" conditions. The bulk of the funds will be held in an structured investment vehicle (SIV) as a way to ward off speculators who smell blood in the water and think they can make a killing by toppling sovereign bond markets in Portugal, Spain and Italy.

Obama's concern is that a Greek default will put pressure on French and German banks (which have 110 billion-euro exposure) that will start the dominoes tumbling again. According to Dow Jones, "JP Morgan's holdings of non-U.S. government bonds increased by $36.5 billion in 2009, while Citigroup's increased by almost $40 B." ("The European Bailout", James Hamilton, Econbrowser)

So, despite the cheery news this week that all four of the nation's biggest banks (Bank of America, Goldman Sachs, JP Morgan, and Citigroup) racked up perfect quarters off their trading desks, (showing that the Fed's liquidity and zero-rates has restored profitability) the banking system is STILL so weak that the President of the United States has to spend his whole weekend hectoring heads-of-state throughout Euroland to beef up their bailout or the whole financial system will come crashing down.

What does that tell us? It tells us that the whole "recovery" meme is a fraud. It tells us that the banks (where lending is down 20 percent, and foreclosures are running at 300,000 per month) are once again engaged in the riskiest type of speculation; that they're using complex financial assets and repo to maximize leverage to goose profits in the middle of a slump. And, it tells us that Obama is Wall Street's biggest champion, a real "enabler" in chief.

Greece should walk away from this farce and start fresh. "Thumbs down" on the EU bailout.

[Robbien]

87. Zimbabwe Big bank about to go belly up

The Zimbabwe Allied Banking Group (ZABG), one of the biggest banks in the country, is on the verge of bankruptcy following revelations of serious financial mismanagement.

A due diligence report by Deloitte and Touche Corporate Finance and a verification report by the Reserve Bank of Zimbabwe (RBZ) in possession of The Sunday Times show that the bank is saddled with potential liabilities of more than$12-million due to alleged mismanagement of depositors’ funds.

The bank was engaged in non-core business, while spending extravagantly on luxury cars, fuel, personal loans and “cafeteria” allowances for top management.

Poor decisions by management, such as underwriting rights issues when the bank had no funding capacity, left it exposed. ZABG also spent large sums of money on promoting 61% of workers to management positions .

. . .

Documents show that ZABG has established a group known as the “top 20″ who earn hefty salaries, with the lowest remunerated of them getting at least $500 of fuel a month, school fees and cafeteria (lunch and dinner) allowances.

The group blows $36460 a month on lunches and dinners. Gwasira gets about $124 a day, while the rest get a minimum of $71 a day.

In Zimbabwe, civil servants earn about $150 a month.

Since 2005, the bank has bought at least 132 luxury cars, mainly for management. The document reveals that: “The Reserve Bank also determined that bank management made a number of imprudent decisions, which increased the bank’s liabilities against the background of a weak financial condition.”

http://www.zimguardian.com/?p=2701


I bet the situation is the same about many of the US banks which were taken over by the FDIC. It is refreshing that the media in Africa tells the details about what is going on in the failing bank.

[Demeter]

109. A Historic Breakthrough for U.S. Billionaires

http://www.informationclearinghouse.info/article25423.htm

A moment of silence, please, for Dan Duncan. The 77-year-old Duncan, a Houston resident, passed away the end of March. He left behind a spouse, four grown children, four grandkids — and a fortune worth $9 billion.

Duncan also left behind another distinction. He has become the first American billionaire to ever leave his heirs a tax-free fortune.

America’s first-ever billionaire — John D. Rockefeller — slid into the hereafter back in 1937. At that time, a federal estate tax had already been in effect for 21 years. John D.’s heirs faced a 70 percent tax rate on the bulk of his estate.

Dan Duncan’s heirs face a 0 percent estate tax levy. His son and three daughters have now become instant billionaires.

If Duncan had passed on last year, instead of this one, his heirs would have had to share their new billions, as many as four of them, with the rest of America. But this year, for the first time since 1916, no estate tax graces the tax code.

How much will the absence of an estate tax this year cost the federal treasury? We can’t say with any certainty. No one knows, after all, how many other billionaires may kick the bucket between now and December 31. We do know that in 2008, the latest year with figures available, the federal government collected $25.7 billion in estate tax revenue.

That sum, by coincidence, would be enough to fully fund the $23 billion Rep. George Miller from California and Senator Tom Harkin from Iowa want Congress to appropriate, as soon as possible, to avert the nation’s worst teacher layoff crisis since the Great Depression...How can a civilized nation afford to hand the heirs of the super rich billions of dollars tax-free and not afford to keep teachers in classrooms?

We can trace our current budget inanity back to 2001, the year the Bush White House pushed Congress to repeal the federal estate tax. But the White House didn’t have the votes needed, under Senate rules, for a costly permanent repeal.

So White House officials cooked the budget books to camouflage the true cost of estate tax repeal. They maneuvered a tax bill through Congress that lowered estate tax rates over the rest of the decade and repealed the estate tax only for 2010. The estate tax, under the 2001 legislation, would then reappear in 2011.

White House strategists, of course, never expected to ever see this reappearance. They figured a future Congress would extend repeal beyond 2010.

But this “breathtakingly cynical” move, as the University of Cincinnati Law School’s Paul Caron notes, would prove too clever by half. By 2007, Bush had lost his House of Representatives majority and any realistic shot at making the repeal in 2010 permanent.

Supporters of the estate tax, meanwhile, assumed that the Congress elected in 2008 would legislate away the one-year estate tax repeal slated for 2010. But that didn’t happen either. In 2009, lawmakers deadlocked.

The friends of the financially fortunate in Congress, a bipartisan group, wanted any new estate tax set at a rate that would, at worse, merely inconvenience the super rich. Lawmakers less friendly to the fortunate wanted much more: estate tax rates high enough to break up grand concentrations of private wealth, a key goal of the reformers who championed the original estate tax a century ago.

Amid this stalemate, last year ended without any legislative estate tax action, and total estate tax repeal for 2010, as stipulated by the 2001 tax cut legislation, went into effect January 1.

The conventional wisdom on Capitol Hill then shifted. Lawmakers, observers opined, would move expeditiously in 2010 to pass some sort of an estate tax and make the levy retroactive for the entire year.

But no one in Congress, notes legal trade journal editor Scott Martin, apparently expected that a billionaire of Dan Duncan’s magnitude would actually go and die without an estate tax on the books. Duncan’s death has changed everything.

“Big estates,” explains editor Martin, “mean big lawyers ready to fight to see those billions of dollars go to the deceased’s heirs.”

Those lawyers will likely battle in the courts, to the last billable hour, any move to make the estate tax retroactive for all of 2010. And the longer 2010 goes without an estate tax on the books, the higher the chances the courts will agree.

In the meantime, none of the obituaries for Dan Duncan that have appeared since his death explore his status as America’s first estate tax-free billionaire. The obituaries have instead gushed over Duncan’s philanthropy. He had contributed, over his last five years, more than $250 million to hospitals and other institutions.

[Demeter]

112. that's it, Bedtime

to sleep, perchance to dream....